MARKET COMMENT
December 13, 2006
Markets seemed a little indecisive today. Even though most equity markets were a little
higher not much progress was made. In
this “data dependent” environment investors psyche is swayed one way or the
other with daily events and news. Today’s
featured news surrounded stronger retail sales data which helped the dollar but
pushed bonds lower. At the same time,
the treasury held an auction of $8B for 10-year bonds that was poorly received.
The interesting news in ETFs over
the past few days has been the announcement of a new yen ETF filed by Rydex for registration which when approved completes, for
the most part, their currency menu. It
had been delayed as Rydex and others battled against
the low yen yields which made structuring a profitable issue difficult. So, Rydex has
decided to cover the funds expenses by selling yen to cover. This isn’t such a hot was to do business, but
precious metals ETFs do much the same. But, it’s good to have the yen issue
available for investors either for speculation or hedging. The only issue will be whether retail
investors will find shorting the yen ETF possible. Time will tell.
Then Barclays has announced that they’ll be issuing an India
ETN on December 20th. This is
great news. An ETN, as opposed to an
ETF, is a debt instrument of Barclays and is linked to the MSCI [Morgan
Stanley] India Index. This index tracks
68 of the largest companies in the Indian market. Further, other ETFs
being contemplated [PowerShares and Claymore, for
example] will be tied to the available India ADRs
listed in the US. This greatly restricts exposure and heightens
risk since so few ADRs are available. In fact, powerhouse company Tata will comprise nearly 40% on any such offering.
We’ve been following IFN for several years while awaiting an
ETF product. The ETN [INP] will charge
only 75 basis points in fees versus other closed-end funds where fees exceed
2%. The only catch will be, do you trust the creditworthiness of Barclays. I think there should be few worries on that
score.
Most other market sectors were relatively quiet today. Ahead is OPEC tomorrow and triple witching on
Friday which could mark an eventful end to an otherwise quiet week.
Have a pleasant evening.
Disclaimer: Among other
issues, The ETF Digest maintains positions in: IEF, USO, DBC, $BSE and IFN.