Emerging markets look good for the rest of 2014: Van Eck Global

Emerging markets economies are poised to offer higher economic growth for the remainder of 2014 than recent previous corresponding periods, according to Van Eck Global, the US parent company of its exchange traded fund business, Market Vectors ETFs. Van Eck Global currently manages over US$35 billion in assets.

David Semple, Portfolio Manager and Head of Van Eck Global’s Emerging Markets Equity Investment Team said, “The tide is turning for emerging markets, which outperformed the broad US market in the second quarter of 2014—an event we’ve not seen for some time. The asset class attracted particularly strong inflows in April and May this year, the highest inflows since March 2013.

“In the second half of 2014 we believe emerging markets will continue to perform solidly, providing better earning outcomes than we’ve seen in the past three years.”

According to Mr Semple, investors are beginning to warm up to emerging markets again as better earnings typically indicate a recovery. He believes the main risks for emerging markets in the second half of 2014 are geopolitical and interest rate sensitivity.

“Ongoing tensions in Ukraine have impacted the Russian economy and the escalation of sanctions will have a broader impact on a fragile European economy. The earnings impact from the sanctions as they exist today is fairly mild, but we think the cost of equity will rise as investors shy away from the possibility of further and more serious geopolitical tension, combined with the possible implementation of full sanctions on listed companies.

“China continues to provide a mixed picture. There is a wide range of opinions, and a great deal of scepticism about the China story,” Mr Semple said. “There is a continuing tug of war between significant positive and negative economic variables. We believe the ongoing modest and targeted stimulus is expected to continue and keep growth above the 7% to 7.5% level. Despite all that, it’s important not to forget the positives, such as the fact that China has the largest e-commerce economy in the world,” he said.

Despite geopolitical risk, Mr Semple believes most emerging markets countries have absorbed a significant amount of bad news. According to Semple, there are good opportunities in Taiwan, India and Latin America.

“The decisive win for the Bharatiya Janata Party (BJP) in India appeared to be beneficial for the stock market, although there are major hopes for better governance and acceleration of capital expenditure in the near-term. In Brazil, the outcome of the election in early October will be important. We expect a change of government will have a positive impact and will help reinvigorate the stagnant economy,” he said.

“Indonesia has some very significant long-run advantages in terms of demographics and resources, but has significant work to do to increase the return on those assets. This will mean increasing the ease of doing business, whether by investing in infrastructure, streamlining bureaucracy, reducing subsidies, and providing a level playing field for investments.

“We believe emerging market economies will continue to offer higher economic growth in the medium term, particularly as investors increasingly diversify away from their domestic economies and identify better value in stronger performing emerging market economies this year and into 2015,” Mr Semple said.

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Matthew McKinnon

Market Vectors ETFs (Market Vectors), the exchange traded fund (ETF) business of US-based investment manager Van Eck Global, today announced it has received an ‘Investment GradeIndex’ rating from research house, Lonsec, for its recently listed Market Vectors Australian Equal Weight ETF (ASX code: MVW).

Market Vectors Australian Equal Weight ETF is designed to track a purpose-built index, the Market Vectors Australia Equal Weight Index, which currently provides investors with equal exposure across 76 of the most liquid large and mid-cap ASX-listed securities.

Matthew McKinnon, Director, Institutions and Intermediaries at Market Vectors Australia, commented, “We are pleased to receive a positive review from Lonsec for Market Vectors Australian Equal Weight ETF – the first equal weight ETF available to Australian investors. Equal weight investing is well established in Europe and the United States, where it is used to build a diversified core portfolio.  The methodology is well suited to the Australian market, which is heavily concentrated with the top 10 stocks making up more than 50% of the top 200 listed companies by market capitalisation. Our research shows that MVW’s underlying equal weight index has outperformed the S&P/ASX 200 Index by 23% over the last 10 years.

“What sets our ETFs apart is the rigorously designed methodology and rules governing the construction of the underlying indices. Each of our ETFs is based on a Market Vectors’ purpose-built index which focuses on liquidity and diversification to design investable indices. Our ETFs therefore comprise portfolios of assets that are liquid and diversified, cost effective and easily accessible to investors via a single trade on the ASX.

“The index methodology for MVW reduces exposure to the large-capitalisation companies that typically dominate Australian benchmark indices and increases exposure to the most liquid Australian mid-caps, providing an alternative to ETFs based purely on market capitalisation indices.

“We are confident that MVW will attract a range of investors from direct and SMSF investors to intermediary and institutions seeking diversified balanced exposure to the Australian equity market,” Mr McKinnon said.

Market Vectors listed its Market Vectors Australian Equal Weight ETF on the ASX this month. The equal weight index has been especially developed by Market Vectors Index Solutions (MVIS), the independent index company of Van Eck Global based in Germany.

Lonsec review – Market Vectors Australian Equal Weight ETF (MVW) 

Lonsec has conviction that Market Vectors Australian Equal Weight ETF can achieve its objective. “The Market Vectors Australian Equal Weight ETF tracks an index that is new to the Australian market and is designed to provide a more diversified exposure than traditional market cap-weighted indices which, given the nature of the Australian economy, have a highly concentrated weighting to banks and miners,” Lonsec said.

“The Fund offers a simple and easy means of gaining a diversified exposure to the Australian share market via a single transaction. The Fund tracks the Market Vectors Australia Equal Weight Index, which provides greater diversification across industries versus traditional market cap-weighted indices,” the ratings report said.

Lonsec favourably noted the transparency of the index. “Lonsec considers the index rules to be very transparent and commends the Van Eck group of companies on making the full index methodology and index constituent selection and review processes readily available to investors.”

“It is Lonsec’s belief that not all index providers are as forthcoming with this information. Furthermore, Lonsec believes that access to transparent, straight forward information on index products, their underlying indices and how they are constructed is crucial to investors’ understanding and ability to gauge suitability,” the report said.

“By equal weighting the index constituents, the underlying index has a significantly higher weighting to mid-cap stocks, and is more diversified by sector and individual security weightings than the S&P/ASX 200 Index,” Lonsec said

Analysis by MVIS reveals that its equal-weight index has outperformed the S&P/ASX 200 in nine out of the last 12 years. Overall, the Market Vectors Australia Equal Weight Index has outperformed the S&P/ASX 200 since 2002 to March 2014 by 23 per cent, according to MVIS

The Market Vectors Australian Equal Weight ETF joins four existing Market Vectors sector-based ETFs which were listed on the ASX in October last year. They are the Market Vectors Australian Banks ETF (MVB), Market Vectors Australian Property ETF (MVA), Market Vectors Australian Resources ETF (MVR) and Market Vectors Australian Emerging Resources ETF (MVE).

Market Vectors Australia is planning to launch more ETFs on the ASX later this year as it continues to gain market share in the Australian ETF market.

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Arian Neiron

Market Vectors, the exchange traded fund business of US-based investment manager Van Eck Global, will shortly launch a new exchange traded fund (ETF) on the ASX with a unique equal weight methodology.

The new Market Vectors Australian Equal Weight ETF (ASX code: MVW) will be the first of its kind in Australia, providing simple and cost-effective access to the most liquid ASX-listed companies, all weighted equally, and can be accessed via a single trade on the ASX.

MVW is designed to track a purpose-built index, the Market Vectors Australia Equal Weight Index, which provides equal exposure to the largest, mid and small cap ASX-listed securities and has demonstrated the potential for strong outperformance versus traditional market cap weighted indexes.

Arian Neiron, Managing Director of Market Vectors Australia, said: “Once launched, MVW will provide investors with more diversified broad based exposure to the Australian equity market and can be used as the core of a portfolio seeking exposure to Australian equities.

“Currently, there are 77 Australian securities that are all equally weighted in the Market Vectors Australia Equal Weight Index, including the big banks such as Commonwealth Bank and Westpac, the big miners such as BHP Billiton and Rio Tinto, as well as smaller securities such as TPG Telecom and SEEK. Each security currently has an equal weighting of approximately 1.30%. This results in a more balanced exposure to Australian companies.

“We believe MVW better captures the performance and diversification of the Australian economy. It removes the large capitalisation biases found in traditional market capitalisation Australian indices, such as the S&P/ASX 200 Accumulation Index, where the top five securities account for almost 40% and top 10 securities account for over 50% of the Index,” said Mr Neiron.

“Our in-depth analysis of the performance of the Market Vectors Australia Equal Weight Index over the last 10 years has demonstrated the potential for MVW to outperform traditional market capitalisation weighted indexes.”

Neiron believes MVW will appeal broadly to all investors including self-managed superannuation funds (SMSFs), advisers and institutions who are seeking diversified exposure to the Australian equity market.

Lars Hamich, Chief Executive Officer of Market Vectors Index Solutions (MVIS), said: “Traditional indexes often don’t provide pure diversification across a given market. The Market Vectors Australia Equal Weight Index is purpose-built to give investors pure exposure to the performance of the Australian economy.

“MVIS conducts detailed analysis of ASX-listed securities in order to determine their inclusion in the Index. Our demanding liquidity screens and pure-play rules deliver a well-balanced and diversified index exposure.

“Our commitment to the best possible transparency is enhanced through easy-to-access index data on our website (marketvectorsindices.com), a free service that enables investors to monitor the underlying index around the clock – a methodology that has been developed in response to a changing global investment landscape,” said Mr Hamich.

Market Vectors now offers over 60 exchange traded products (ETP) spanning international markets, commodities, emerging markets, global equities, fixed income and currency sectors. Market Vectors has clients worldwide and has approximately $US22 billion in assets under management, making it the seventh largest ETP family in the US and the tenth largest worldwide as of 31 January, 2014.

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Arian Neiron

Market Vectors ETF Trust (Market Vectors), the exchange traded fund (ETF) business of Van Eck Global, today announced the appointment of Arian Neiron as Managing Director of its Australian business.

Market Vectors was first launched in the US in 2006 and has grown to be a top-ten worldwide ETP provider. Market Vectors entered the Australian market in 2012 and is seeking to list new ETFs in Australia.

Neiron joined Market Vectors Australia in 2012 as Senior Director from management consulting firm Sunstone Partners, where he was a partner of the business and specialised in product and strategy for the asset and wealth management sectors. Previously, he worked for Perpetual for over eight years as a Senior Portfolio Specialist and Head of Product Development. Neiron also worked for Credit Suisse as Head of Product Development specialising in Alternative Investments, Hedge Funds, Commodities and Private Equity.

As Managing Director of the firm, Neiron will lead the Australian Market Vectors business, setting strategy and overseeing all product and distribution efforts. Neiron reports directly to Lars Hamich, Managing Director, International Business Development, Van Eck Global and Chief Executive Officer of Market Vectors Index Solutions.

“We are delighted to have someone of Arian’s calibre to lead our team in Australia. Arian has exceptional knowledge and experience in product development, strategy and distribution and we are confident that Arian will provide strong leadership and grow the business in Australia,” said Mr Hamich.

Market Vectors offers over 50 exchange traded products worldwide spanning international markets, commodities, emerging markets, global equities, fixed income and currency sectors. As of 31 May 2013, Market Vectors managed total assets of US$23.7 billion.

Arian Neiron, Managing Director, Market Vectors Australia said, “I am excited to lead the expansion of Market Vectors in Australia. We are fully committed to growing our presence locally by offering investors high-quality products, exceptional service and a focus on ETF education. The Australian ETF market is growing rapidly reaching A$7.7 billion in June 2013 – almost a 50 per cent increase from 12 months ago. We plan to participate and contribute to that growth by providing Australian investors with ETFs offering targeted exposure to important investment sectors and educating investors about the benefits of ETFs.”

Van Eck Global has a separate business based in Frankfurt, Germany called Market Vectors Index Solutions (MVIS). This business was founded to solely develop purpose-built indices specifically built for ETF investing. MVIS develops, monitors and markets the Market Vectors Indices. More than US$14.3 billion[1] is invested in investment products based on Market Vectors Indices.

“Many traditional indices have been developed to describe the market and measure its performance, however often they don’t provide the most representative, or most comprehensive basket of stocks for a given market sector. What sets most of our ETFs apart is our unique index methodology and rules governing the construction of the underlying indices. Most of our ETFs are built on purpose-built indices providing full replication, transparency, liquidity, diversification and pure play exposure to the underlying securities,” Mr Neiron said.

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