Hit and Flop ETFs of Last Week

Wall Street recorded its best week in eight months, countering the earlier losses from worries over the impact of coronavirus on the economy. This was especially because of China stimulus measures, slew of upbeat economic data and better-than-expected earnings. Notably, the S&P 500 and Dow Jones notched their biggest weekly gains since June, having climbed 3.2% and 3%, respectively.

The People’s Bank of China (PBOC) injected $1.7 trillion yuan ($242.9 billion) into the economy and unexpectedly lowered interest rates on reverse repurchase agreements by 10 basis points (bps) to prop up the coronavirus-affected economy (read: China ETFs to Gain on New Stimuli to Combat Coronavirus).

On the domestic front, the labor market was off to a strong start in 2020, creating 225,000 new jobs in January. The manufacturing sector, which had languished in contraction territory for five months, rebounded strongly in January while services sector activity also picked up, with industries reporting increases in new orders. The solid data suggests that the economy could continue to grow moderately this year.

Earnings for 70.3% of the S&P 500 market capitalization are up 0.4% year over year on 3.0% higher revenues, with 70.7% beating on earnings and 67.3% surpassing revenue estimates. While the proportion of companies beating earnings estimates is tracking below the same group a year ago, the revenue beat percentage is notably above historical periods.

Further, the positive development on the U.S.-China relationship added to the strength. China has pledged to halve tariffs on some $75 billion of U.S. imports, beginning Feb 14, as part of its phase-one trade deal with the United States. Tariffs on some U.S. goods will be cut to 5% from 10%, while levies on some other items will be reduced to 2.5% from 5%, per China’s Ministry of Finance.

Given this, we have highlighted last week’s best and worst performing ETFs:

Best ETFs

Global X MSCI China Information Technology ETF CHIK

The stimulus measures by PBOC eased worries over the impact of the coronavirus on the economy, thereby leading to rally in China stocks. A number of China ETFs jumped last week, with CHIK leading the way, gaining 9.7%. This fund offers exposure to the information technology sector of China by tracking the MSCI China Information Technology 10/50 Index. It has accumulated $13.3 million in its asset base and trades in light average daily volume of 10,000 shares. It charges 65 bps in annual fees and has a Zacks ETF Rank #3 (read: What Lies in China ETFs' Fortunes in the Year of Rat?).

Invesco Solar ETF TAN

This ETF, which offers global exposure to 22 solar stocks, climbed 8.2% last week on increased focus on climate change. American firms dominate the fund’s portfolio with 47.2% share, followed by China (22%) and Spain (7.7%). The product has amassed $543.3 million in its asset base and trades in average daily volume of 227,000 shares. It charges investors 71 bps in fees per year and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.

ARK Innovation ETF ARKK

Technology sector has been on a tear on a string of better-than-expected earnings from some of the bigwigs.  ARKK is an actively managed fund seeking long-term capital appreciation by investing in companies that benefit from the development of new products or services, technological improvements and advancements in scientific research relating to the areas of DNA technologies (Genomic Revolution). It also invests in firms that seek to gain from industrial innovation in energy, automation and manufacturing (Industrial Innovation), increased use of shared technology, infrastructure and services (Next Generation Internet), and technologies that make financial services more efficient. In total, the fund holds 42 securities in its basket and charges 75 bps in annual fees. The product has gathered $2.2 billion in its asset base and trades in average daily volume of 247,000 shares. It has gained 7.8% last week (read: Tech ETFs & Stocks Outperforming in 2020).

Worst ETFs

GS Connect S&P GSCI Enhanced Commodity TR Strategy Index ETN GSC

Commodities have been beaten down badly last week, partly owing to a stronger dollar. Speculations are rife that the steps being taken to contain the spread of the coronavirus are going to cause problems for global supply chains and result in a significant drop in demand from China leading to decline commodity prices. GCG is linked to the S&P GSCI Enhanced Commodity Total Return Strategy Index, which uses commodity futures that are broadly diversified across a host of commodity types. It charges 1.25% in annual fees and trades in paltry volume of 1,000 shares. The note has AUM of $108.6 million.

ProShares VIX Short-Term Futures ETF VIXY

Volatility products have been the biggest winners as they underperform when the stock market booms. Particularly, VIXY lost 12.3% last week. The ETF focuses on the S&P 500 VIX Short-Term Futures Index, measuring the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration. It has amassed $278.8 million in AUM and charges 85 bps in fees per year. The fund trades in average daily volume of around 3.2 million shares.

Breakwave Dry Bulk Shipping ETF BDRY

Shipping stocks have been hammered as dry bulk freight rates dropped to new lows due to shrinking demand across all vessel categories. As such, BDRY fell 6% last week. It provides exposure to the daily price movements of the near-dated dry bulk freight futures. The fund has accumulated about $3.4 million in AUM. It trades in a paltry volume of about 9,000 shares per day on average and charges higher annual fee of 1.85% (see: all the Industrial ETFs here).

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Invesco Solar ETF (TAN): ETF Research Reports
 
ProShares VIX Short-Term Futures ETF (VIXY): ETF Research Reports
 
ARK Innovation ETF (ARKK): ETF Research Reports
 
GS Connect S&P GSCI Enhanced Commodity TR Strategy Index ETN (GSC): ETF Research Reports
 
Breakwave Dry Bulk Shipping ETF (BDRY): ETF Research Reports
 
Global X MSCI China Information Technology ETF (CHIK): ETF Research Reports
 
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