Market Overview

A Look Ahead: This Week's ETFs to Watch

For the first time in four weeks, the S&P 500 closed lower last week, throwing ebullient bulls a curve ball in a process.

As is often the case with today's intimately intertwined global financial markets, U.S. stocks were pressure not so much by news here, but headlines from other parts of the world. Last week, it was Asia that took its turn roiling markets.

HSBC flash reading of China's May PMI, the official version of which will be delivered this week, sent Asian stocks into a tizzy Thursday. Japan was not immune as that country's equities endured the worst one day performance in more than two years.

The result was some of this year's top-performing ETFs being taken to the woodshed and plenty of apprehension ahead of this holiday-shortened week. Never fear because we have a few nifty ideas up our sleeves for the week ahead.

WisdomTree Japan Hedged Equity Fund (NYSE: DXJ)
Indeed, the WisdomTree Japan Hedged Equity Fund makes for a predictable member of this week's list, but that is how life in the fast lane goes for 2013's top asset-gathering ETF. DXJ lost 6.6 percent last week and while some analysts have suggested caution on the fund, others are extolling the virtues of highlighting the strong fundamental case for Japanese stocks.

Over the weekend, Bank of Japan Governor Haruhiko Kuroda did what he could to assuage skittish investors, saying investors in Japan are not overly bullish. There's "no sign at this point of excessively bullish expectations in asset markets or in the activities of financial institutions," said the BoJ leader, according to Bloomberg.

Saying the week ahead will be interesting for DXJ is an understatement. Other options include the iShares MSCI Japan Index Fund (NYSE: EWJ), the ProShares UltraShort Yen (NYSE: YCS) and the PowerShares DB 3X Inverse Japanese Government Bond ETN (NYSE: JGBD).

iShares MSCI Thailand Capped Investable Market Index Fund (NYSE: THD)
The case of the iShares MSCI Thailand Capped Investable Market Index Fund is a simple one. This ETF, for multiple years now, has been one of the brightest stars among country-specific emerging markets funds. That run can continue, but slowing economic growth and a strong baht are issues that need to be quashed.

Enter the Bank of Thailand. It is all but a foregone conclusion that the central bank will join the rate cut club when it meets on May 29. In April, BoT lowered its 2013 inflation estimate to 2.7 percent so there is room for a rate cut.

The issue is by how much. A 25-basis point reduction may not be enough to satisfy markets. BoT may need to go for 50 basis points, taking the benchmark rate to 2.25 percent.

Consumer Staples Select Sector SPDR (NYSE: XLP)
Such benign fare as the Consumer Staples Select Sector SPDR or the Vanguard Consumer Discretionary ETF (NYSE: VCR) usually do not appear on this list, but there are a couple of reasons why XLP and VCR are worth a look this week. First, if risk off is the name of the game to end May, these ETFs should benefit. Then again, XLP and VCR are both close to stiff technical resistance.

Second, is a scenario that is a mix of opinion and fact. Opinion: Markets are overstating the impact A.G. Lafley's return to Procter & Gamble (NYSE: PG), by far the top holding in XLP and VCR, will have on the stock. Fact: Lafley was previously P&G CEO for a decade and the stock rose a tidy 94 percent. The stock has also risen about 48 percent in the five years since Lafley left.

Do the math. That is a similar trajectory with and without Lafley. Obviously, the stock performed well under Lafley's stewardship, but the hope that he is the Steve Jobs/Larry Page/Elon Musk of the consumer staples business may be flawed at best.

For more on ETFs, click here.

Posted-In: Long Ideas News Sector ETFs Broad U.S. Equity ETFs Short Ideas Specialty ETFs New ETFs Emerging Market ETFs Best of Benzinga

 

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