Chartwell Global ETF Report

As U.S. markets lost ground on Friday, some global exchange-traded funds or ETFs showed strength. The Australia ETF (EWA) hit new highs up 1.66% for the day and the SPDR Russell/Nomura Japan Smallcap ETF (JCS) was up 1.67% on speculation that despite the benchmark interest rate hike this week, policymakers will put the emphasis on stimulating growth. The silver ETF (SLV) was up 2.42% for the day and precious metal ETFs did very well for the week. The China (FXI) and India (INP) had another bad day both down 3% reflecting global investors desires to make their portfolios a bit more conservative. Some real estate related ETFs continue to show weakness attracting shortsellers. The Cohen & Steers Real Estate ETF (ICF) was down 2.08% and the Dow US Home Construction ETF (ITB) was down 1.95% for the day.

Global real estate ETFs are a different matter as they continue to attract great interest. The new International Real Estate ETF has been one of our most viewed posts so here is a little more on SPDR DJ Wilshire International Real Estate ETF (RWX). This ETFs objective is to closely match the returns and characteristics of the total return performance of the Dow Jones Wilshire Ex-US Real Estate Securities Index (ticker: DWXRS), an equity index based upon the global (ex-US) real estate market.The top five country weightings are Australia 19.97%, United Kingdom 19.01%, Japan, 17.93%, Hong Kong 8.03%, Canada 7.02%.

With exchange-traded funds or ETF growing so rapidly - shakeout perhaps sparked by a market pullback is inevitable. Those that are too narrowly focused, have low trading activity, minimal assets, sponsored by smaller ETF families without the muscle to advertise and distribute are just some of the factors that will determine ultimate success or failure. My advice is to take a little time to do some homework before grabbing a new ETF off the shelf. Think it through to see if it really makes sense for your portfolio and , above all, look under the hood of the ETF to see what companies are inside.

Major U.S. indexes lost ground on Thursday with the exception of Nasdaq which was up slightly on the back of a surge in semiconductor stocks. The biggest ETF gainer of the day was the Proshares Ultra Semiconductor ETF (USD) up 4.61% followed by Semiconductor HOLDRS (SMH) up 2.67%. The Biotech HOLDRS (BBH) lost 1.28% and weak house building sentiment pushed the SPDRS Homebuilders (XHB) down 1.52%.

A weaker yen helped the Nikkei 225 cross the 18,000 level for the first time in almost seven years and South Korea (EWY) and Australia (EWA) hit new highs. Europe was up across the board with the exception of Belgium. The South Africa market rose 1.49% and Latin America showed its resilience with Brazil (EWZ) reaching new high and Chile up 1.53%.

The India exchange-traded note or ETN (INP) continued its slide down 1.74%. INP's largest two holdings, Infosys Technologies and Reliance Industries make up more than 25% of its basket. Strong consumer confidence surveys have helped consumer oriented ETFs and two of the Powershares consumer ETFs which weight companies in their ETF baskets based on fundamentals, (PRFG) and (PEZ), boast the best returns year to date, 7.65% and 5.98%.

The gap between the returns on a fund and its index is known as tracking error and the smaller the better is usually best for ETF investors. With some exceptions, ETFs listed in the U.S. had a low index-tracking error in 2006, meaning they delivered returns fairly in line with their target benchmarks, according to a report from Morgan Stanley. Tracking error in 2006 averaged 0.29% for U.S. major-market ETFs, 0.33% for U.S. "style" ETFs, 0.61% for U.S. sector and industry funds, 0.72% for international portfolios, and 0.09% for fixed-income ETFs. The Power Shares family of ETFs had the highest average tracking error at 0.71% and the highest average ETF expense ratio at 0.59%.

Inflation concerns, mixed earnings and oil prices closing above $60 for the first time this year sent U.S. stocks lower Wednesday. In Asia, Hong Kong rose and Japan was flat showing no clear reaction to decision by Bank of Japan to increase benchmark interest rate from 0.25% to 0.50%. The interest rate hike is a sign of confidence in the Japanese economy and should help prices going forward. Europe lost ground with the exception of the Netherlands (EWN).

Precious metals and oil ETFs shone today with the Market Vectors Gold Miners ETF (GDX) snapping back 3.79% today, the iShares gold ETF (IAU) up 2.91% and the silver ETF (SLV) up 2.86%. The WisdomTree International Utilities ETF (DBU) lost 1.26% and the Switzerland (EWL), UK (EWU) and Spain (EWP) ETFs all lost 1%.

After a stellar 2006, the exchange-traded fund or ETF that tracks the MSCI Emerging Markets Index (EEM) has risen 2.9 per cent, compared with 3.76 per cent for the MSCI World Index. Investor inflows into emerging market funds remain strong but have slowed from the stellar pace seen at the start of last year


The WisdomTree family of exchange-traded funds or ETFs announced today that they will list six domestic earnings-weighted ETFs this Friday, February 23. These new ETFs are aimed primarily at ETF investors seeking broad market exposure or exposure to traditional sector classifications through companies with an earnings track record.

WisdomTree Total Earnings Fund (EXT)
WisdomTree Earnings 500 Fund (EPS)
WisdomTree MidCap Earnings Fund (EZM)
WisdomTree SmallCap Earnings Fund (EES)
WisdomTree Earnings Top 100 Fund (EEZ)
WisdomTree Low P/E Fund (EZY)

American stocks moved slightly higher Tuesday in a quiet market helped by merger news. Many Asian markets were closed for China New Year holiday with South Korea, Australia and Japan flat. European markets across the board were down slightly on low volume.

The Powershares Consumer Discretionary ETF (PEZ) and the Healthshare Emergency ETF (HHF) were both up 1.62% for the day. The Russell 1000 Growth ETF (IWF) was up 1.34%. With oil prices off dollar the SPDR Energy ETF (XLE) was off 1.05% but the Market Vectors Gold Miners ETF lost 2.10%. Gold exchange-traded funds or ETFs have taken the wind out of the sails of mining stocks. Some reasons include that gold ETFs offer a cleaner play without the added operating and country risks involved with investing in gold mining companies. Citigroup estimates that gold ETFs currently hold about $13 billion of gold. Since January 2006, gold is up 29% while the FTSE gold mines index is up only 12%.

The Powershares family of exchange-traded funds or ETFs has a March 1st target date for launching the first Technical ETF (PDP) which will harness the power of a state-of-the-art Point & Figure charting methodology created by Dorsey Wright that identifies "technical leaders" within the marketplace. The process analyzes the relative strength of more than 3,000 individual stocks from various broad industry sectors and sub-sectors.