Nobody has missed the explosion of ETFs and how popular they have become over the past decade. Expressing views on specific regions and sectors has become so much easier for the masses. One of the problems with people trading ETFs, especially the leveraged versions, is that they lack the understanding of what the actual ETF consists of and in the leveraged version very few understand the slippage factor. This leads often to people being right about the long term view, but they end up losing money.
Today NYSE tweets:
This is hardly surprising, especially given the fact most fund managers underperform their indices but we wonder how many of the Millennials actually understand what their ETFs consist of?
One of the most mentioned ETFs currently is the Emerging Market ETF, EEM US. The trend has been one way and EEM US continues trading within the pretty much perfect down trend.
While many non pros (and actually surprisingly enough, many pros) know this is the play on Emerging Markets they often can’t mention the top 10 names in the ETF. EEM US is actually full of internet, mobile and semis:
Close to 10% of the returns in the EEM US is dependent on Tencent and Samsung.
We watch the EM space carefully both technically as well as fundamentally.
One of our favourite inputs for watching the Emerging Markets fundamentals is following all related to South Korea. This export driven country is a great indicator of the Emerging Markets. With the economy representing both the new tech economy as well as the old economy we find South Korea significant for taking the fundamental pulse of both the global and the emerging markets.
Below is a longer term chart comparing the EEM US (top chart) to the South Korean Export (lower chart).
Source: charts by Bloomberg
