Skip to main content

Don Dion's Weekly ETF Blog Wrap

The Power Shares India, the SPDR KBW Regional Banking and the Claymore/AlphaShares China Real Estate were three ETFs on Don Dion's radar.
  • Author:
  • Publish date:

Here's some of what Don Dion blogged about on RealMoney this past week.

A Passage to ETF Profits

Posted 2/5/2010 3:53 p.m. EST

If you're looking toward Asia for ETF plays,

PowerShares India

(PIN) - Get Invesco India ETF Report

is probably your best bet.

The International Monetary Fund recently said India is one of first nations to recover from the worldwide economic downturn, and added that conditions were right for it to start raising interest rates slowly. This signals that growth would remain robust despite moves to combat inflation, which is currently at a 13-month high.

Investors also seem less jittery about India than they do about Asia's other economic dynamo, China. When China raised banks' reserve requirements slightly and moved to reign in loose credit last month, local and world markets swooned. But when the Central Bank of India told lenders to increase cash reserves on Jan. 29, PIN and the other Indian ETF,

Wisdom Tree India Earnings

(EPI) - Get WisdomTree India Earnings Fund Report

, actually gained on the day. Investors seem more confident in the Indian economy's ability to grow without government stimulus.

Ultimately, India's economy seems better prepared than China's to come off government support. India doesn't suffer from a real-estate bubble nor is there as much volatility-inducing speculation on the country's stock market by foreign entities. Stemming inflation through tighter credit is healthy for the economy, and Indian stocks will benefit as the inflation rate comes down. Emerging-market investors should reduce their exposure to China and increase allocations to PIN for a less risky and potentially more robust play in the short- to mid-term.

I prefer PIN to EPI because of its larger allocation to Indian IT companies, and if investors want more detail on these ETFs, they can look


> > Bull or Bear? Vote in Our Poll

Can't Stop Regional Bank ETF

Posted 2/4/2010 5:20 p.m. EST

TheStreet Recommends

Even amid today's broad market selloff, the regional banking industry appears to be a source of strength. Throughout most of the day, the

SPDR KBW Regional Banking ETF

(KRE) - Get SPDR S&P Regional Banking ETF Report

has been beating not only large-cap financial ETFs like the

SPDR Financial Select Sector SPDR

(XLF) - Get Financial Select Sector SPDR Fund Report

but the

S&P 500

as well.

This action lends credence to my theory that the small banks will continue to be one of the strongest sectors going forward.

KRE's outperformance today can be attributed to strength across a number of the fund's top holdings that have managed to hold up well. Some holdings, such as

Bank of Hawaii

(BOH) - Get Bank of Hawaii Corporation Report


TCF Financial Corporation


, have even managed to stay positive until late in the day.

The fund is also suffering a bit more than necessary due to a top holding,

Webster Financial

(WBS) - Get Webster Financial Corporation Report


Recently, the Connecticut-based company has been working to shut down an elaborate

embezzlement scheme

that was discovered earlier this week. In total, the plan is estimated to have cost the bank $11 million. In response to this drama, Webster took a hit, dropping 6% today on the heels of a 4% drop yesterday.

Luckily, despite it's ranking within KRE, the total impact that Webster's troubles have had on the fund has been minimal. Due to the fund's vast diversification, Webster accounts for less than 3% of the ETF's total portfolio.

Going forward, I stand by the regional banks as a leadership sector. KRE will continue to prove especially strong, thanks in large part to its vast, well-diversified portfolio.

Storm Brewing in Chinese Real Estate

Posted 2/3/2010 2:13 p.m. EST

It's time to say farewell to Chinese real estate and

Claymore/AlphaShares China Real Estate ETF

(TAO) - Get Invesco China Real Estate ETF Report

. Although the Chinese real estate industry saw a strong run-up throughout last year's recovery, I am seriously questioning the longevity of this rally, and investors need to be prepared for what could be a gut-wrenching downturn.

The recent performance of TAO, which provides exposure to some of the largest property players in China's housing market, gives credence to my calls for caution. The fund has fallen in both our long- and short-term momentum rankings.

Throughout the past months, a growing number of analysts and market commentators have offered their two cents regarding the housing industry in China. This week independent economist Andy Xie threw his hat in the mix, providing his own insight in a recent



In his analysis, he comes to the conclusion that not only is the Chinese real estate industry facing a bubble, but it is set to burst. The eventual downfall is expected to stem from the government's recent actions to rein in loans and speculation, which will ultimately tie off demand.

Sure enough, following the economist's bearish forecast, evidence was released showing that Xie's predicted downturn may already be in the works. Although real estate prices in China continued their upward trajectory though the close of 2009, the trend saw a slight reversal in the start of 2010, according to

Shanghai Daily

. Additionally, Shanghai's new-home sales in January dipped a gut-wrenching 51% from the month previous.

The party in China's real estate industry is coming to a close. Right now, the best thing for investors holding TAO to do is exit their positions and watch from the sidelines.

I would also exit

iShares FTSE/Xinhua China 25

(FXI) - Get iShares China Large-Cap ETF Report

, which has shown similar momentum weakness and has exposure to real estate via financials. For the moment,

Claymore/AlphaShares China Small Cap

(HAO) - Get Invesco China Small Cap ETF Report

remains relatively strong, and I would not completely bail on China yet.

A special note from Don: There's no doubt in my mind that ETFs are the most exciting investment vehicles of the decade.

That's why I'm thrilled to announce

TheStreet ETF Action by Don Dion

, TheStreet's newest premium service.

You can build a profitable ETF portfolio right alongside me -- click here to find out how.

Image placeholder title

At the time of publication, Dion has no positions in ETFs and stocks mentioned.

Don Dion is president and founder of

Dion Money Management

, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.