A Look At The GlobalX Funds’ Colombia ETF

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Last year investors welcomed a few frontier markets ETFs such as the MENA Frontier Countries (PMNA) by PowerShares, the Africa ETF (AFK) and the Gulf States ETF (MES) from Market Vectors and the Frontier Markets (FRN) from Claymore/BNY Mellon.These frontier market ETFs can be extremely volatile and are suitable for investors who can take high risks. Frontier markets can be defined as the ultimate wild west of the modern times.

One of the frontier markets is Colombia.Until recently there was no way to invest in Colombia via ETFs. Since only two Colombian ADRs trade in the US one could not get exposure to the major Colombian stocks easily. GlobalX Funds, a new ETF provider has launched the first ETF for Colombia.

The Global X/InterBolsa FTSE Colombia 20 ETF (GXG) seeks to track the performance of the FTSE Colombia 20 Index. The annual expense ratio is 0.86%.

The two ADRs – Ecopetrol(EC) and Bancolombia(CIB) comprise about 39% of the 2portfolio. Ecopetrol is the major petroleum company in Colombia and Bancolombia is a bank. Ecopetrol is the largest stock in the main stock market index called the ICBC index. It is also the most widely held stock and can be considered the Petrobras (PBR) of Colombia.

As the ETF started trading on Feb 5, there is not much information about the ETF such as the total asset held, yield information, etc. The factsheet for this ETF can be found here.

GlobalX has also filed for Argentina, Egypt, Peru, and Philippines ETFs. We will review those when they start trading.

Utility Stocks of the S&P ADR Index

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The following are the utility components of the S&P; ADR Index:

1.Cemig-PN (Companhia Energetica de Minas Gerais SA) – CIG
Current Yield: 4.38%

2.Copel -PNB (Companhia Paranaense de Energia SA) – ELP
Current Yield: 1.89%

3.Endesa-Chile – EOC
Current Yield: 0.71%

4.Enersis SA – ENI
Current Yield: 1.71%

5. National Grid plc – NGG
Current Yield: 4.26%

6. Transalta Corp. – TAC
Current Yield: 6.18%

7.Veolia Environnement – VE
Current Yield: 9.66%

The World’s Best Developed Market Banks 2009

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The Global Finance magazine has announced this year’s winners for the best banks in 24 developed countries. Ireland and Iceland were left out from this contest.

As per the editors of this magazine “The winners of this year’s awards are those banks that attended carefully to their customers’ needs in difficult markets and accomplished better results while laying the foundations for future success. ” These banks were selected based on both objective and subjective factors.

The Objective factors used were:

  • Growth in assets
  • Profitability
  • Geographic reach
  • Strategic relationships
  • New business development
  • Innovation in products

The Subjective factors used were:
The Opinions of-

  • Equity analysts
  • Credit rating analysts
  • Banking consultants
  • Others involved in the industry

The Best Banks in the Developed Markets for 2009 are listed below. If the bank trades in the US, the ticker and current yield is shown.

A) North America
Bermuda – Butterfield Bank

Canada – Scotiabank (BNS)
Current Yield: 8.06%

United States – J.P. Morgan Chase(JPM)
Current Yield: 7.64%

B) Europe
Austria – Bank Austria

Belgium – KBC Group

Denmark – Danske Bank(OTC: DNSKY)
Current Yield: 26.14%

Finland – Pohjola Bank

France – BNP Paribas(OTC: BNPQY)
Current Yield: 17.57%

Germany – Commerzbank (OTC: CRZBY)
Current Yield: 42.09%

Greece – Eurobank EFG

Italy – Intesa Sanpaolo (OTC: ISNPY)
Current Yield: 25.54%

Luxembourg – Banque et Caisse dargne de lEtat

Netherlands – Rabobank

Norway – DnB Nor

Portugal – Banco Espirito Santo

Spain – Banco Santander(SAN)
Current Yield: 20.90%

Sweden – Handelsbanken

Switzerland – Credit Suisse (CS)
Current Yield: 9.98%

United Kingdom – HSBC (HBC)
Current Yield: 10.44%

C) Asia/Pacific and Middle East
Australia – Commonwealth Bank of Australia

Hong Kong – HSBC (HBC)
Current Yield: 10.44%

Israel – Mizrahi Tefahot Bank

Japan – Resona Holdings

Singapore – United Overseas Bank (OTC: UOVEY)
Current Yield: 4.26%

The original press release from Global Finance magazine can be found here.

Disclosure: Long BNS, STD, DNSKY

Foreign Bank Stocks: Red All Over

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On Friday Feb 20th, US banks Bank of America (BAC) and Citigroup (C) fell heavily on huge volume due to nationalization fears. Bank of America fell to $2.53 before ending the day at $3.79 after the White House reassured investors that nationalization was not in the cards. Similarly Citibank closed at $1.95. BAC is down 73.08% so far this year and Citibank is off nearly 71%.

While the banks in the US are getting decimated, foreign banks are not immune either. In fact some of the global bank stocks have performed equally or even more worse than the US banks.

The following table shows the Year-To-Date (YTD) performance of global bank ADRs listed in the US organized exchanges:

[TABLE=137]

Chart:

Foreign Bank ADRs Year to DAte change

Note: All data as of Feb 20, 2008

As seen from the table and chart above, only two Chilean banks – Corpbanca(BCA) and Banco De Chile(BCH) are up this year. The Irish and British banks are the worst performing banks with huge losses.

Today The Times reports that RBS will be split into good bank and bad bank as part of a radical restructuring plan. Last month Ireland nationalized the Anglo Irish Bank but ruled out the nationalization of the other two banks – Bank of Ireland (IRE) and Allied Irish Banks(AIB). Overall banks in the developed world have performed worse than the ones in the emerging markets year to date.

Summary of Global Investment Returns Yearbook 2009

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Each year investors eagerly await the release of the Global Investment Returns Yearbook by London School of Business (LBS). This year’s yearbook was sponsored by Credit Suisse Research Institute and the researchers were Elroy Dimson, Paul Marsh and Mike Staunton of LBS. The authors urge investors to keep the faith with equities.

What is the Global Investment Return Yearbook?

“The Yearbook is a comprehensive and authoritative analysis of total returns since 1900 for stocks, bonds, cash, foreign exchange and inflation in 17 national stock markets and three worldwide indexes, covering Europe, North America, Asia, and Africa.”

The following are excerpts from the Yearbook for 2009:

  • When the stock equities bottomed last November, investors worldwide had lost a whopping $21 Trillion
  • Equities were the best performing asset class in every 17 country since 1900
  • In the 17 countries real return of equities was between 3% to 6% per year
  • For investors the last decade has been the lost decade
  • Overall the long run(1900-2008), investors get rewards for the higher risk of investing in stocks. We can infer this from the Figure 1 below. The grey bars indicate the returns during the boom years of the 1990s.

Long Run Stock Returns

  • A $1 invested in US stocks in 1900 would have grown to $14,276 by the end of 2008 for an annualized yield of 9.2%. Taking the consumer price rises into consideration this would equal to a real return of 6.0%. For the same period, bonds returned 2.1%.
  • After World War II, the equities of the defeated countries of Germany and Japan were crushed with returns of -88% and -96% respectively
  • Between 1949 and 1959 stocks rose by 516% in real returns
  • For the decade after World War I, equities returned 206%
  • In the economic miracle years after the end of WW II, Japanese and German equities returned 29.1% and 40.4% per year

Chart – Real Returns of US Asset Classes during the four “Golden Ages”:

(click to enlarge)

US Equity Reurns

  • South Africa, Sweden and Australia equities topped US equity performance since 1900 as shown below

US Foreign Stocks

Table – Individual Country Equity Real Returns since 1900s:

[TABLE=136]

There are much more fascinating details in the Global Investment Returns Yearbook 2009. To download the full report click here. (file opens in pdf)

For the 2008 Global Investment Returns Yearbook go here.(file opens in pdf)

Source: Credit Suisse Research Institute