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U.S. government borrowing is accelerating inflation expectations, making investments priced in foreign currencies more attractive. The best-performing geographically focused funds outperformed all other categories for the week ending yesterday.
The yield on 10-year U.S. government bonds rose to 3.75% yesterday, a six-month high. Even investors in so-called "risk-free" securities want to be compensated for the potential loss in value of the U.S. dollar due to inflation.
The best-performing geographically focused fund this week is the
Templeton Russia and East European Fund
, gaining 14%. While flat for the week, the Russian ruble has been strengthening against the dollar for the past 3 1/2 months and is now at its strongest level since Jan. 9.
, one of the fund's biggest holdings, rose 13%. As the largest holder of ruble deposits, Sberbank is helped by a rising ruble, giving confidence to Russian depositors to leave their money in the bank and not convert it to other currencies.
jumped 26% after the Russian steel producer got an extension of a bridge loan to finance an acquisition and the restart of a shaft furnace at its Southern Urals Nickel Plant, which added 15% to capacity utilization.
soared 20% on reporting lower-than-expected losses and a 20% increase in wireless subscribers compared with a year earlier.
India's rupee has been on a three-month rally against the U.S. dollar, bringing it to its strongest level since December 2008. The
spiked 13%, continuing a climb that tracks, in part, the advancing rupee.
Two Indian clothing companies held by the fund,
, zipped 36% and 24%, respectively. Another standout holding,
, rose 28% on word of a 1.96 billion rupee ($41.6 million) construction contract from
All 10 of the worst-performing geographically focused funds this week are inverse funds betting against select foreign markets, especially Latin America, emerging markets, Japan and China.
Funds sinking the furthest were
ProFunds UltraShort Latin America
, off 12%;
Direxionshares Emerging Markets Bear 3X Shares
, down 10%; and
ProFunds UltraShort Emerging Markets
, dropping 9.1%.
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Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.