5 ETFs to watch this week

Keep an eye on funds in Egypt, Japan, energy and agriculture.

By TheStreet Staff Mar 28, 2011 11:12AM

By Don Dion, TheStreet

 

Here are five ETFs to watch this week.

 

1.    Market Vectors Egypt ETF (EGPT)

 

The Egypt ETF has been one of the more interesting funds to watch this year. In late January, the nation's markets were closed because of sweeping political protests. With the stock market halted, share creation in EGPT was halted as well. With no new shares coming to market, the fund essentially became a closed-end fund. EGPT separated from its underlying index and a massive premium developed.

 

In the middle of last week, this premium was largely wiped out when share creation restarted, after the Egyptian stock market reopened. The fund has had some rocky sessions as it has reverted back to its underlying index. It will be interesting to see how it holds up this week.

 

EGPT's volume will be interesting to watch as well. Prior to the political protests, this fund flew under the radar, largely ignored by investors. However, as unrest swept through nation, its popularity surged, leading to a volume spike.

 

With the protests now in the past, it will be interesting to see if EGPT once again falls into the background.

2.    iShares MSCI Japan Index Fund (EWJ)

 

Japan continues to be a closely watched region of the globe as investors, analysts and market commentators debate and discuss the nation's recovery after the devastating earthquake and tsunami.

 

Investors looking for a way to tap into the nation's revival have poured into the Japan ETF, leading to a spike in the fund's volume. Interest was further fueled early last week when famed investor Warren Buffett offered promising words for the nation's future.

 

In the week ahead, investors will likely maintain a close watch over the nation's recovery. EWJ, meanwhile, may continue to see volatility has investor sentiment shifts from headline to headline.

 

3.    iPath Dow Jones UBS Natural Gas Subindex Total Return ETN (GAZ)

 

Energy is in the spotlight and natural gas has become an industry darling. Japan's government continues to struggle to contain the impact of the troubled Fukushima Dai-ichi power plant and investors, concerned about the state and future prospects of the nuclear energy industry, have turned to natural gas and other energy sources to compensate.

 

GAZ and other futures-based natural gas funds have become major targets for energy hungry investors. The sudden spike in interest, however, has resulted in a troubling occurrence for this fund.

 

Back in 2009, GAZ's managers intervened in the fund's growth by capping share creation. This typically has not presented as an issue as long as interest in natural gas has remained tempered. However, now that the fuel is in the spotlight once again, the fund has returned to this limit.

 

Like EGPT when Egypt's markets were closed, no new supply of GAZ is coming to market to satisfy demand and the ETN is behaving like a closed-end fund. GAZ has developed a premium which currently stands at 17%. This disconnect will cause GAZ to trade in an uncertain manner. While exciting to watch, I highly urge investors to stick to the sidelines.

 

4.    Market Vectors Agribusiness ETF (MOO)

 

Although the food industry remains in the spotlight, it has been a back-and-forth month for various agriculture-related ETFs. While some fast moving funds such as the iPath Dow Jones UBS Cotton Subindex Total Return ETN (BAL) have continued to trek higher, others, such as the iPath Dow Jones UBS Sugar Subindex Total Return ETN (SGG) have run into headwinds.

 

While the future action from these single crop futures products will likely be exciting to watch, in the coming week the equity-based MOO will be of particular interest. On Wednesday, its No. 4 holding, Mosaic (MOS), reports earnings. The company's report will likely provide clues as to the state of the agricultural chemical industry. This component of the farming sector accounts for over 40% of MOO's index.

 

5.    iShares MSCI Germany Index Fund (EWG)

 

Regions of Europe continue to struggle with their looming debt issues. However, while much of the media have been focusing on the turmoil facing nations such as Spain and Portugal, fellow E.U. component, Germany, has been relatively stable.

 

Late last week, investors were treated to promising economic data relating to Germany. Although the nation's business confidence number saw a dip, the decline was less than predicted.

In the days ahead, EWG may prove to be an attractive fund for risk tolerant investors if Europe-related fears remain tempered. However, it is important to avoid getting carried away with this fund. By keeping exposure small and focused, investors can track Germany's strength while, at the same time, protect themselves against the turmoil facing the broad E.U.

 

TheStreet contributor Don Dion runs Dion Money Management. At the time of publication, he didn't own any of the securities mentioned in this article

 

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