With Emerging Markets and notably China soaring back to life early in 2017, we have seen some very near term upside call interest in EEM (iShares MSCI Emerging Markets) involving the January 36.50 calls.EEM closed up more than 1% today, and is on a strong three day run, soaring above its 50 day MA. EEM has not exactly attracted assets yet during this short term run, however, seeing mild outflows of about $57 million in the trailing one month period.
Likewise, competing ETF VWO (Vanguard FTSE Emerging Markets) has seen mild inflows of about $50 million during this time frame. We are watching the Bull levered EDC (Direxion Daily Emerging Markets Bull 3X) here in the short term given the presence of upside call buyers, with these January calls expiring in about two weeks.
China of course carries the largest weighting in the Emerging Markets indices, making up 28% of the MSCI Emerging Markets Index and 25% of the FTSE Emerging Markets Index that VWO tracks. When we look at EEM’s top holdings we can get a decent idea of what has been likely moving markets lately, and we see the following names: 1) Samsung Electronics Co. Ltd (3.68%, South Korea), 2) Taiwan Semiconductor Manufacturing Co Ltd. (3.61%, Taiwan), 3) Tencent Holdings Ltd. (3.60%, China) 4) BABA (2.72%, China) 5) China Mobile Ltd. (1.71%, China) 6) Naspers Ltd. Class N (1.67%, South Africa) China Construction Bank Corp H (1.62%, China) 8) BIDU (1.17%, China) 9) Industrial And Commercial Bank of China Ltd H (1.17%, China), and 10) Hon Hai Precision Industry Co Ltd. (1.03%, Taiwan. We note that most of the individual equity holdings are ordinary securities traded overseas, with exceptions in BABA and BIDU, which trade as ADR’s here in the U.S.
The main takeaway we see from examining the top weightings within EEM, is that eight of the top ten holdings are either based in China or Taiwan, both countries of which have been in the headlines frequently in regards to early takes on Trump’s presidential trade policy concerning the countries.
iShares MSCI Emerging Markets Indx (ETF) (NYSE:EEM) closed at $36.09 per share on Thursday, up $0.39 (+1.09%). Year-to-date, EEM has gained 3.08%, versus a 1.28% rise in the benchmark S&P 500 index during the same period.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.