The Top Trade Partners of Germany 2012

Posted by David Hunkar on 26 May 2013, 2:33 pm

The German economy is the largest in Europe with a GDP size of about 2.6 Trillion Euros in 2012. As an export-driven economy, Germany consistently runs an export surplus.

The following chart shows Germany’s major trading partners in 2012:

Click to enlarge

Source: De Statis

Some interesting facts about Germany’s trade:

Germany’s most important trade partners are other European countries. For example, the major source of imports last year was The Netherlands and the destination for exports was France.
About 69% of “Made in Germany” goods were exported to European countries.
The 2nd most important market for German exports were Asia followed by the Americas.
Asia accounted for only 18% of German imports.
After France, the top destination for German exports was the U.S. and UK.
In terms of imports, the country’s major import partners were The Netherlands followed by China and France.
While the U.S. is a major export and import market for Germany, Canada does not appear in the top 10 trading partners list.

Related ETFs:

Market Vectors Germany Small-Cap ETF (GERJ)
iShares MSCI Germany Index Fund (EWG)
iShares MSCI Germany Small Cap Fund (EWGS)

Disclosure: No Positions

Should You Invest in Gold Stocks or Gold?

Posted by David Hunkar on 26 May 2013, 9:52 am

One of the questions perennial confronting investors looking to invest in gold is whether to invest in physical gold or gold miners who actually produce the gold.

Generally investing is physical gold is better idea than buying gold stocks. Since buying and holding physical gold nowadays involves many problems such as the possibility of theft from one’s home, most investors choose an ETF that is backed up actual gold held in secure locations. The SPDR Gold Shares ETF (GLD) is one such ETF that is most preferred by investors. It is not a wise strategy to invest in gold mining stocks. This is due to many reasons including high volatility, low or no dividend payments, consistency in earnings, etc. Gold mining involves not just production but also exploration for discovery of new sources of the yellow metal. Exploration by definition involves high risk and many companies have collapsed in the past such as the infamous Bre-X of Canada. Mark Twain’s famous comment “A mine is a hole in the ground with a liar standing next to it” cannot be ignored before investing in gold miners. When gold prices rose year-after-year in the past few years before the recent downtrend, gold stocks did not keep up and in fact lagged the growth in gold prices. The following chart shows the difference in the long-term returns of the SPDR Gold Shares ETF (GLD) and Market Vectors Gold Miners ETF (GDX) which can be considered as proxy for gold mining stocks:

Click to enlarge

Source: Yahoo Finance

Here is another proof showing the performance of South African gold miners and gold price. South Africa is one of the largest producers of gold in the world. Hence the return of South African mining stocks against gold prices is highly relevant to investors.

Click to enlarge

Source: Angles and Perspectives, Q2, 2013, the Quarterly Newsletter of PSG Asset Management

The blue line shows the performance of FTSE/JSE Gold Index which tracks the gold mining companies listed on the South African market.

From the report in the PSG Asset Management newsletter:

In mid-April the gold price fell 15% in three days.

At $1,322 the gold price was 31% below its high of $1,921 reached in September 2011. Some market commentators therefore believe gold now finds itself in a bear market.

The decline in the gold price resulted in a precipitous decline in the share prices of South African-listed gold stocks. At the time of writing, the FTSE/JSE Gold Index has endured a 37% year-to-date decline, following a 20% decline in 2012.

Gold shares have been a very poor investment for some time and the Gold Index is at the same level it was at in 2001.

What makes this lack of return all the more shocking is that over this period of more than 11 years the gold price has increased five times in dollars and more than four and a half times in rand terms. The FTSE/JSE All Share Index has tripled
over the same period.

Disclosure: No Positions

Update – 3/29/14:

Click to enlarge

Since 2004, gold mining stocks traded on South Africa’s JSE have consistently falled while gold price has for the most part gone up.

Source: Gold and platinum mines: ‘Eating sardines’ or ‘trading sardines’?, Allan Gray

Three Differences Between MSCI and FTSE Indices

Posted by David Hunkar on 25 May 2013, 10:47 pm

Index providers MSCI and FTSE have launched many indices over the years. Hundreds of ETF providers and other companies use these indices to benchmark the performance of their products. Some use the MSCI while others use the FTSE. For example, the iShares Emerging Markets ETF (EEM) tracks the performance of the MSCI Emerging Markets Index. The Vanguard FTSE Emerging Markets ETF (VWO), on the other hand, tracks the return of FTSE Emerging Transition Index.

Late last year, Vanguard decided to replace benchmark indices from MSCI with FTSE indices as for their ETF products. However iShares decided to stay with MSCI.

What are some of the differences between the MSCI and FTSE indices?

While there are many differences between the indices in terms of holdings, countries, sectors and style, in this article let me list three differences.

1. The MSCI EAFE Index (Europe, Australasia, Far East) and the FTSE Developed Ex North America Index have a greater than 10% difference in holdings.

2. The two index providers also differ in terms of country allocations in their emerging market indices. For example, MSCI considers South Korea as an emerging country and includes it in the emerging market index. But FTSE considers South Korea as a developed country and excludes it from the index.

3. MSCI excludes ~~Pakistan and~~ United Arab Emirates(UAE) from its emerging index since they are assigned the frontier market statuses. But FTSE includes them in its Emerging Index.

Update June 2017: MSCI added Pakistan to the MSCI Emerging Markets Index

The key takeaway from this post is that investors have to thoroughly review the benchmark index that an ETF tracks before deciding to investing in that ETF.

Source: MSCI versus FTSE: Why they’re not the same, Canadian Investment Review

Related:

Three Differences Between S&P 500 and DAX Indices (TFS)

Disclosure: No Positions

The Top 50 Global Pharma Companies 2013

Posted by David Hunkar on 25 May 2013, 3:35 pm

The Pharmaceutical Executive magazine published its annual ranking of the Top 50 Pharma Companies Worldwide based on sales earlier this month. New York -based Pfizer(PFE) was topped the list with a sales of over $47.4 billion in 2012.

The Top 50 Global Pharma Companies are listed in the tables below:

Click to enlarge

Source: Pharmaceutical Executive

Here are a few observations:

Swiss drug giant Novartis(NVS) came in at number two with sales of over $45.0 billion.
Among the top 10, five are European pharma companies including Novartis, Sanofi (SNY), Roche (RHHBY), GlaxoSmithkline(GSK), and Astrazeneca (AZN).
Teva (TEVA) of Israel, the world’s largest generic maker had revenues of sales of over $17.0 billion and took the 11th spot. Teva’s growth so far has been astonishing and is now within striking distance of taking the 10th rank from Eli Lilly(LLY).
For the first time, Indian pharma maker Ranbaxy Laboratories appears in this top 50 list. Ranbaxy is majority-owned by Daiichi Sankyo of Japan.
For the first time in more than 50 years, year-on-year growth contracted in the U.S. market due to patent expiration of blockbusters such as Plavix, Seroquel, Lipitor, and Zyprexa and increased scrutiny of pricing by payers and regulatory approvals.
Due to the ongoing recession, growth in Europe was flat.
Fresenius is a leader in the dialysis market. Its Medical Care division trades on the NYSE under the ticker FMS.