Wednesday, August 24, 2016

Bonddad's Wednesday Linkfest

IWM (Russell 2000) Is In An Upward Sloping Channel

New Home Sales Up 12.4% M/M/31.3% Y/Y

Valuation of the 10 Largest Homebuilders by Market Capitalization

1-Year Chart of the Homebuilders ETF

Emerging Market Debt Is Looking Attractive

From the FT

This is now stabilising. Balance sheets of EM corporates look much healthier than those of their US counterparts and the strength differential is likely to increase further as US companies continue to add to their debt (figure 1).

Many EM companies are reducing their financing needs and capital expenditure levels, and turning their attention to efficiency and cost optimisation programmes, with business models shaped around return generation over expansion. All of these measures will translate into stronger cash flow generation and a more rapid deleveraging process.

Demand for exposure to emerging markets has been on the rise in recent months, and one fund that has captured a lot of that interest is a fixed-income ETF, the iShares JP Morgan USD Emerging Markets Bond ETF (EMB).

So far in 2016, EMB has raked in $4.35 billion in net assets—huge inflows for a fund that has $9.7 billion in total assets today. EMB was the fifth-most-popular ETF in July based on creations, and is ranked among the 10 biggest creations we’ve seen year-to-date.

The fund’s performance has a lot to do with its popularity. Compared to the U.S. stock market and an aggregate bond strategy such as the iShares Core U.S. Aggregate Bond ETF (AGG), EMB has seen impressive gains after being stuck in a sideways rut for most of 2014 and 2015. 

Mexican Economy Contracts Slightly in 2Q 

“We have an economy in which the internal market has been working in line with expectations but there’s also a difficult scenario globally, especially weakness in the United States’ industrial sector growth,” Mr Aportela said during quarterly press conference.

The Mexican economy continues to be beholden to negative factors abroad. According to Mr Aportela, the primary drags in Q2 were low oil prices, low global growth, and lower than expected growth and industrial activity in the US. As such, Mexico’s industrial sector, which includes manufacturing and oil, contracted 1.5% from the previous quarter.

But looking elsewhere, the Mexican economy is solid. Unemployment was 3.9 per cent in the second quarter, down from 4.4 per cent a year before. Real wage growth was 1.6 per cent in the first half of the year, the largest growth for a six-month period since 2001. This is partly thanks to a streak of low inflation, which was 2.65 per cent in July. Foreign direct investment grew 4.6 per cent in the first half of the year.

 Weekly Chart of the Mexican ETF

1-Year Charts of the Major Latin American ETFs