First up is an IPO of Hutchison Port Holdings Trust which is part of conglomerate Hutchison Whampoa which will list in Singapore. The actual ports are in Hong Kong, Shenzhen and Macau but the listing, as mentioned, is in Singapore. The trust structure can be thought of as being like a REIT and this one will yield 5-6%.
If you’ve been reading this blog for a while you know I think China is an important investment destination but also a very complex one. Our exposure is something of an underweight by way of the country’s weight in a couple of thematic ETFs. While I continue to believe banks, manufacturers and reverse mergers should be avoided I think things like ports, toll roads, energy and staples items are a good way to go. Chinese don’t have to speculate on real estate but there are things that they essentially have to do or money that has to be spent which is where I will continue to look.
There was an article on Seeking Alpha yesterday titled Your Ira Doesn’t Have To Be Boring. The post was so bad I’m not going to link to it, I’ll just say your IRA probably should be boring.
SPDR came out with two new ETFs. One is an emerging market bond fund denominated in local currency ticker symbol EBND and the other is an emerging market dividend fund ticker EDIV. Both are me too funds with some differences and some similarities. If you have interest in these spaces you should add these to the list of options to consider.
Speaking of new ETFs, FactorShares listed five so called spread ETFs. They capture two times the performance difference of two different asset classes so for example the FactorShares 2X S&P 500 Bull/USD Bear (FSU) captures a combo that benefits when the SPX outperforms the US dollar. As I understand it on first glance the USD wouldn’t have to go down for FSU to go up it would just have to go up less than SPX but it would be better if USD did go down. FSU would also do well if SPX went down 1% and the dollar went down 2%.
Note that these are levered and have a daily reset. I would imagine there will be contango issues for a couple of them which after a closer look (that I haven’t taken yet) might be a benefit for a couple of them. Conceptually, the hedges available here are valid but it is a good bet that people will use them incorrectly and it remains to be seen if this will work inside of an ETF. If it does work it will be just what the doctor ordered but for very few people. While I have no interest I will be curious to see how they trade. The crew at ETF Database reports that these can be traded commission free at Interactive Brokers. Maybe in a year or two all ETPs will be commission free?
We executed a trade on Wednesday buying Ecopetrol (EC) for larger accounts where suitable. For some clients it was a partial swap out of Wisdomtree International Energy ETF (DKA) and for other clients it served as a rebalance to increase energy exposure. Relative to the last couple of days we got a lucky entry point.
More importantly, the country is becoming more relevant in the world economic order, is sitting on a lot of oil, is a modest oil exporter, EC is about 3/4 of the sector in Colombia, yields 2.4% based on trailing dividends (you can never be certain with dividends for foreign stocks going forward) and was down 23% from its high when I bought it. I’ve mentioned the name several times before, have been watching/learning it for a while and finally stepped in.
And closing out on a blogging related note Adam Warner wound down the Daily Options Report a couple weeks ago noting that it had run its course. Adam’s knowledge and humor made him just about the best blogger out there, I’ve said that several times along the way. When I first started blogging, someone told me it is very difficult to keep a blog updated. Over time that has morphed into being very difficult to not keep the blog updated. I think this may have been the case with Adam. Either way congratulations.