Top 5 Most Desired ETFs by Fund Flow Percentage

It's true that the second most coveted ETF by dollars invested in May was the iShares Emerging Market Fund (EEM). Investors poured $1.07 billion into EEM... and roughly $800 million more into the Vanguard Emerging Market Fund (VWO).

(Note: VWO and EEM both track identical indexes... the MSCI Emerging Market Index.)

There's little doubt that the investing public has embraced the emerging market growth story. Yet rather than look at investor desire in absolute dollar terms, I thought we might learn a little something different by examining ETF interest in percentage growth of total net assets.

		% Growth of Net Assets
Direxion Financials Bear 3x	FAZ	63%
Vanguard MSCI MidCap	VO	39%
US Natural Gas	UNG	38%
iShares MSCI-Taiwan	EWT	25%
ProShares UltraShort S&P 500	SDS	19%

Judging from the looks of these figures, it doesn't appear that traders are finished betting against the well-being of the U.S. financial system. We're looking at 60%+ growth in a fund that seeks 3x the daily inverse performance of the Russell 1000 Financial Services Index. And for that matter, pursuing double the inverse performance of the S&P 500 with ProShares UltraShort S&P 500 (SDS) may be a message from traders that reads, "It ain't over."

By the same token, one can't have a mid-cap fund like Vanguard MSCI Mid-Cap (VO) jump in demand by nearly 40% in a single month if there weren't believers in U.S. economic recovery. VO gained 4% in May, and currently resides above a long-term moving average.

Yet for me, the most telling net asset growers have a "greet shoots" stake in alt energy and tech. In fact, one month ago, I suggested that the US Natural Gas Fund (UNG) could surge if oil kept on rising.

Oil kept rising alright. Did UNG follow suit? It did pile on 11% in May... but the results have been pretty spotty. Volatility and inconsistency still plague the commodity. At the same time, an awful lot of investor interest came UNG's way in May.

Finally, the iShares Taiwan Index (EWT) is an enigmatic investment, as it is hardly an emerging market growth story. In truth, it is one of the strongest indications on the health of the global economic cycle because its lifeblood is semiconductor demand. And semiconductor demand historically leads the way out of recessions.

Taiwan is even more intriguing these days because of its relationship with China. In spite of well-publicized political differences, Taiwan remains one of China's most important suppliers.

iShares Taiwan Index (EWT) is up a staggering 40% in 2009. It is also more than 20% above its 200 day moving average. (Review my April column, "3 Asian Countries Are Rocketing Higher.")

Full Disclosure: The author, a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above.

Comments

[skrangeo:]

Natural Gas hasn't followed oil because the two aren't directly related. Oil is a global commodity whereas natural gas is a (relatively) domestic issue. Furthermore, natural gas is in excess supply (as evidenced by natural gas storage currently higher than the trailing 5 year average) and the demand is down (industrial, weather).

Simply associating the two because they are energy commodities is not correct.

Jun 09 09:48 AM

[Stone Fox C...:]

skrangeo,
Oil is in excess supply as well. The 2 commodities have diverse uses, but the historical ratio still applies. Why should it change this year?

Jun 09 10:57 AM

[tuj:]

"The 2 commodities have diverse uses, but the historical ratio still applies. Why should it change this year? "

US shale production.

Jun 09 03:30 PM

[skrangeo:]

The landscape of U.S. natural gas production has changed dramatically over the last several years due to "resource" plays (a.k.a. shale plays). Technological advances are pushing very high deliverability wells to the forefront (Haynesville wells coming in at 15 mmcf/d+). With the drop in prices (due to excess supply), some plays are becoming borderline uneconomic. Unfortunately, there are lease drilling commitments that must be maintained. Due to that scenario, there are hundreds of wells being drilled, cased, but not completed in high deliverability areas (i.e. the Barnett). With any indication of strength, these wells will be completed and brought on, thus continuing to swell supply levels and keep the pricing weak in the near term. So, even though the rig count is down, there is still this large backlog of drilled (but not producing) wells ready to fill in the near term drop in rig count.

I'm currently bearish on natural gas for at least the next 3 months. That much data will be needed to re-evaluate the current natural gas supply / demand scene.

Jun 09 05:45 PM

[xxxx:]

as the market goes up and valuations get extreme you take aout a hedging position in an invesrse fund .

Jun 10 08:00 AM

[mbkelly75:]

Percentages do point out more than straight dollar figures. Thank you for your work here.

Jun 10 11:33 AM

[buyforeclos...:]

UNG is the 13's os a buy and hold until EOY NG at 5 + - Currently at 3.75 UNG should go to 20 on a squeeze when NG hits 5

Gold at 930 is when I would start nibbling and cost average...

but summer is low demand season so could go lower... then again, the gold bugs and inflation ( looking out past 09 ) have kept prices up...in retrospect it seem last months fall to 865 was a screaming short term buy as gold retraced to almost 1000 and miner stocks shot up.... AUY EGO and HL CDE will be good buys on pullbacks

OiL service plays NE WH have made big runs.... look for pullbacks..... very good companies.... If HD goes back to 22.75 BUY has good divy also..... JPM has bad price action although BAC seems to be doing well up from 10 to 12 as others fall....hmmmm tough call there. ok my 2 cents GL

Jun 10 05:15 PM

[bobbobwhite:]

If NG is so plentiful, why are not more cars made that can run on it? That would solve the oversupply with demand. It seems to me that the smart and intuitive move is to use up the more available and cheaper resources first, all the while pushing to integrate the more costly and air-friendly green resources into the mix as these cheaper and more plentiful resources diminish.

Duh.

Jun 11 10:02 AM

[sixpackistan:]

Wow. I didn't expect to see the Taiwan ETF in there. Interesting.

Jun 11 10:29 AM

[christophe:]

Thanks for the article.

I also think NG is due for a pop (in fact today it's doing a little pop). If NG is so cheap and OIL so high, the laws of capitalism dictate that demand for the cheapest energy will rise...basic 101 stuff....
Granted it could take time for this adjustment...

Gary concerning the ETF you have to take that with a grain of salt. For example in my Sharebuilder401k (owned by ING) account my only choice for emerging markets is EEM. My second none-US ETF is EFA.

If fact my total choice is around a dozen ETFs... so of course those 12 ETFs will look favored. I'm suspecting other ETF based 401k offer a similar choice....

Jun 11 02:17 PM

[2Labradors:]

UNG is a buy. I think a great pairs trade is short coal, long gas

Jun 11 10:19 PM

[skrangeo:]

'If NG is so cheap and OIL so high, the laws of capitalism dictate that demand for the cheapest energy will rise...basic 101 stuff...."


ugh. when I see useless, uneducated drivel like this I can't help but roll my eyes.

oil and natural gas are not interchangeable. they don't have the same market. they don't have the same transportation issues, same refining issues, same...the list goes on and on.

The people making these oil = gas comments couldn't tell you ONE thing about the actual natural gas market right now, storage, demand, supply, etc.

Jun 14 08:47 PM