International ETF Update: Israel, Thailand, China, and Latin America

Israel ETFs Could Get Healthy Gain On Drug Maker’s Acquisition

Teva, a major holding in Israel’s ETFs, said it’s going to buy up a rival.

The $7 billion purchase of Barr Pharmaceuticals (BRL), will further cement Teva’s status as the world’s largest generic drug maker. Barr is the fourth-largest. Teva also said it’s going to expand its presence into the United States and Eastern European markets, as well.

The deal is expected to close at the end of this year, the Associated Press reports.

Teva (TEVA) is 22.5% of the iShares MSCI Israel Investable Market Index (EIS) and 8.3% of the NETS TA-25 (TAV). Both funds launched this year. EIS is up 0.8% since inception on March 28, while TAV is down 10.8% since its June 9 inception.

Meanwhile, Lockheed Martin, the world’s largest defense company, says it may sell Israel some combat ships with a value of as much as $1.9 billion, report Edmond Lococo and Tony Capaccio for Bloomberg.

The U.S. Defense Department said that it was in the interest of the United States to help Israel develop and maintain a strong self-defense capability.

Some aerospace and defense ETFs could benefit:

• PowerShares Aerospace & Defense (PPA): down 17.9% year-to-date; Lockheed is 7.2%
• iShares Dow Jones U.S. Aerospace & Defense (ITA): down 19.1% year-to-date; Lockheed is 7.6%

Will Thailand’s Rate Increase Help Its ETF?

Thailand’s economy is no stranger to rising prices that affect the economy and its ETF. For that reason, the central bank raised its benchmark interest rate for the first time in two  years.

Inflation is rising the fastest it has in a decade, and the bank cautioned that more increases were possible, says Suttinee Yuvejwattana for Bloomberg. The rate is now at 3.5%.

The baht also fell on concern that the increase wasn’t going to be enough to do the trick and cool the inflation rate, which hit 8.9% last month. The rising cost of food and oil have been forcing central banks from Vietnam to Pakistan to raise borrowing costs, despite a slowdown in the United States that has cooled demand for Asian exports.

Thailand’s key stock index slid for three straight days, losing 3.4% Friday.

As part of an effort to help the nation’s poor, Thailand’s prime minister announced a $1.4 billion program to cut fuel taxes, offer free electricity and water and waive fares for bus and train seats.

The iShares MSCI Thailand Investable Market Index (THD) seems to reflect the ailing state of the country’s economy these days, as it’s down 25% since its April 1inception. Will the rate cuts be enough?

China’s Redirected Foreign Investment Could Help Latin America’s ETFs

China’s recent $250 million decision could help Latin America-related ETFs.

China Investment Corp. (CIC) has decided to inject $200 billion into its sovereign wealth funds, and $250 million of that is going toward emerging markets, reports Irwin Greenstein for Seeking Alpha. It turns out China must diverge from the falling dollar and tap into greater reserves such as Latin America, which can generate the energy necessary for China’s development.

CIC is responsible for managing part of China’s foreign exchange reserves, and it’s the sixth-largest sovereign wealth fund in the world. It began operations on Sept. 29, 2007. Sovereign wealth funds are huge investment organizations owned by central banks and are accountable to no one.

CIC’s emerging markets plan has two focal points:

1. Diversifying out of their $1.7 trillion in foreign-exchange reserves, mostly U.S. treasury bonds and fixed-income assets
2. Gaining control of energy reserves

Just as other dollar investors are, CIC is taking a hit as the second-largest holder of U.S. Treasury securities.

Latin American ETFs might benefit from this move toward diversification:

• iShares MSCI Brazil Index (EWZ): up 0.8% year-to-date
• iShares S&P Latin America 40 Index Fund (ILF): up 2.8% year-to-date
• SPDR S&P Latin America (GML): up 0.6% year-to-date