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Matthew Sauer, Esq.
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Matthew Sauer, Esq. is the President and Chief Investment Officer of the Mutual Fund Investor Guide. Each month he publishes the Investor Guide to Fidelity Funds, Investor Guide to Vanguard Funds and ETF Investor Guide. On a weekly basis he publishes the Global Momentum Guide, focusing on sector... More
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  • ETF In Focus: Wisdom Tree Emerging Currency Fund (CEW) 0 comments
    Sep 4, 2013 4:33 PM | about stocks: CEW

    Emerging market currencies have been weak of late and one fund has taken a beating in response: the WisdomTree Emerging Currency Fund (NYSEARCA:CEW). It holds a basket of emerging market currencies and they nearly all been weak against the U.S. dollar.

    The fund recently underwent a rebalancing, with each of its 15 holdings back to the target 6.67 percent weight at the end of July. The results since then can be clearly seen in the list of holdings below: Mexico, Brazil, Turkey, Indonesia and India have all seen their currency's share of the basket decline, with India's decline the most start at 6.11 percent.

    At the other end, the Korean won looks relatively impressive, growing to nearly 7 percent of the basket, until one looks at the won's performance in the past month-it has only gained about 1 percent versus the U.S. dollar. With that type of strength at the top of the basket, it's no wonder CEW is trading near multi-year lows.

    Shares of CEW closed at $19.65 on Friday, only slightly above the $19.50 level that has served as support since 2010. Shares previously bounced off this support level twice, and briefly broke it back during the 2010 sell-off in May/June that saw an unusually strong U.S. dollar. A bounce here is possible as well, and it will be critical for the performance of all emerging market ETFs, not only CEW, since stronger currencies will be a sign that economic concerns are overblown. That said, shares can bounce quite a ways and still be within a larger downtrend headed for lower lows.

    A breakdown in emerging market currencies here will signal that the problems in India and Indonesia are spreading, and with Brazil and Turkey under stress, a wider crisis will not be confined to one geographic region. And since there is little support once this support level is breached, odds are a more serious crisis will follow if shares pierce support.

    Aside from short- and intermediate-term considerations, CEW is a solid fund offering exposure to some of the most important and most liquid emerging market currencies. Investors looking for emerging market currency exposure have a few options, with some bond funds out there as well, but the choices for local currency denominated bonds is small-and that comes with interest rate risk. For investors looking solely for currency exposure, CEW does the job.

    The ETF Report lists CEW as a "Sell" and gives it a Power Index Rating of 71.

    If you would like more information on the unique proprietary rating system used in our newsletter, please call us at (800) 548-3797.

    Historical Performance (as of 8/30/13)

     

    YTD

    1 year

    3 years

    (Annualized)

    5 years

    (Annualized)

    CEW

    -6.82

    -3.44

    -0.54

    -

    BofA ML USD Libor 3 Mon

    0.2

    0.34

    0.36

    0.72

    Currency

    -4.28

    -3.03

    -0.17

    -0.77

    Past performance is no assurance of future results.

    Top 15 Holdings (as of 8/30/13)

    Top 15 account for 100% of assets

    South Korea

    6.97%

    China

    6.95%

    Chile

    6.86%

    Poland

    6.82%

    Colombia

    6.79%

    Russia

    6.76%

    Malaysia

    6.72%

    Philippines

    6.70%

    Thailand

    6.66%

    South Africa

    6.60%

    Mexico

    6.55%

    Brazil

    6.55%

    Turkey

    6.53%

    Indonesia

    6.42%

    India

    6.11%

    Volume, Assets, and Expenses

    CEW has an average trading volume of 125 thousand shares per day and $192 million in assets under management. It has an expense ratio of 0.55%.

    ETF Report's Power Rankings

    Power Index: 71

    Power Trend: -

    Recommendation: Sell

    (Sources: Morningstar, Wisdomtree.com)

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: CEW
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