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ETF Times: January 3-7

Last week saw the launch of the first European ETF to track the inverse performance of the MSCI Emerging Markets and a new uranium ETC on the LSE

Morningstar ETF Analysts 11 January, 2011 | 6:12PM
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New Listings
db x-trackers launched a new equity ETF on the London Stock Exchange. It is the first ETF in Europe to track the inverse performance of the emerging market benchmark. The db x-trackers MSCI Emerging Markets Short Daily Index ETF trades in both pounds sterling (ticker symbol: XESG) and US dollars (XEMD) and levies a total expense ratio (TER) of 0.95%. db x-trackers plans to launch the ETF on the Deutsche Börse later this year. Because of the compounding effects of daily leverage, the ETF will not generate exactly one times the inverse performance of the MSCI Emerging Markets Index over holding periods longer than one day. As such, this ETF is not suitable as a buy-and-hold investment. Its usefulness is limited to very short-term hedging purposes or for placing short-lived speculative bets against the emerging markets benchmark for those investors that fully understand the effects of the daily compounding of leverage.

db ETC launched a new uranium ETC on the London Stock Exchange. The db Uranium ETC (ticker symbol: XURA) is a note sponsored by Deutsche Bank which is 109% collateralised with physical gold. It tracks the performance of the spot price of uranium. Because of the paucity of alternatives for gaining exposure to the price of uranium and the difficulty that Deutsche Bank may have in hedging its exposure, the product has a very high TER of 1.5%.

Best and Worst Performers for the Week of January 3-7
The top performing ETPs for the week were those that track the performance of Chinese equities in general, and those exposed to the country’s real estate sector in particular. News that the government may delay implementation of a property tax was the likely catalyst. The launch of the new db Uranium ETC was well-timed, as prices for yellow cake increased sharply, reaching a two-year high.

A number of silver ETPs dominated the list of the week’s worst performers as prices slipped from last week's highs. Some speculate that the positive economic news from the US had an effect as it pushed the dollar higher and nudged traders and investors away from commodities. Actions by the Chinese government to curb inflation such as increasing reserve requirements and hiking the benchmark interest rate may also have played a role. Palladium prices also pulled back on similar concerns, as well as rumblings that China may attempt to curb vehicle production in an effort to stem the pollution problem in the country.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Morningstar ETF Analysts  research hundreds of ETFs available to European investors. The Morningstar Rating for ETFs is based on a risk-adjusted performance measure.