First Trust lists Dorsey Wright and dividends ETFs
First Trust is joining the momentum train and listing three new ETFs, two of which use Dorsey Wright IP for picking momentum stocks.
- First Trust S&P International Dividend Aristocrats ETF (FID)
- First Trust Dorsey Wright Momentum & Low Volatility ETF (DVOL)
- First Trust Dorsey Wright Momentum & Value ETF (DVLU
DVOL and DVLU will both have two indexes. The first index – common to both – will use the Nasdaq-owned Dorsey Wright system to pick 50 momentum stocks from the Nasdaq US Large Mid Index based on relative strength. For those who need reminding, relative strength is a stock picking strategy that looks at the rate at which a company’s share price is going up. Relative strength strategies are based on the idea that securities that have recently risen or fallen in price will continue that trend. (See Cliff Asness explanation of momentum, the factor on which relative strength is based).
The relative strength scores for each product is then smooshed together with a separate volatility and value score. Volatility is scored based on lack of price movement, the prospectus says (hard to see how this fits with relative strength in a non-tautologous way). Value, for its part is scored based on (1) price-to-sales ratio; (2) price-to-book ratio; (3) price-to-earnings ratio; and (4) price-to-cash flow ratio. It will be interesting to see how these Dorsey Wright products fly. From what we understand momentum and value are hard to blend together into a single fund.
FID, the odd one out of the three new listings, will try and give investors big dividends cheques. It starts by taking the S&P Global Broad Market Index. It then narrows down the universe of eligible stocks by using looking at dividend growth and payout ratios. Within this universe, the top 100 securities by dividend yield are chosen and weighted based on said yield. At each rebalancing, the weight for each company is capped at 3% and the weight of each country and GICS sector is capped at 25%.
ChinaAMC lists an ETF for “China’s Nasdaq”
China Asset Management may sound like an innocuous name, but the Beijing-based fund manager is one of the largest finance companies in Asia and the first Chinese institution to list an ETF. Today, ChinaAMC will be adding another product to the Chinese ETF market, the China Asset GEM Index Investment Fund (159957).
The new fund will track the ChiNext Index. The index, is – from what we understand – a Nasdaq-style index, but focussed on Chinese companies. The index looks for high growth enterprises, particularly in the tech sector. It is, therefore, more volatile than more standard Chinese indexes like the CSI 300.
The next 50 – from Nifty
India’s ETF market is small and runs at a higher cost base, but ICICI trying its hand at a new ETF. The ICICI Prudential Nifty Next 50 ETF (ICICIN50) will track the Nifty Next 50 Index. The index has an amusingly helpful name, where the “next 50” refers to the next 50 companies by market capitalization following the Nifty 50. We are unaware of any other global benchmark with such a name.
BOCI–Prudential lists wise ETF
BOCI-Prudential’s Chinese joint venture is listing a new ETF that is very wise. The W.I.S.E. - Nasdaq Overseas China New Economy Companies Top 50 Index Tracker (3182) will attempt to provide foreign investors exposure to the China "new economy" (where have we heard that before?). It will track Nasdaq Overseas China New Economy Companies Top 50 Index. The index includes the largest 50 companies from China (excluding A shares) in Consumer Goods, Health Care, Consumer Services or Technology according to standard industry classifications.
More interesting products in Korea
Korea’s retail-driven thirst for exotic and derivatives based ETF is getting a slight slaking today with the listing of futures-based ETFs by Mirae and Samsung. They are:
- Mirae Asset Tiger 10Y U.S. Treasury Note Futures ETF (305080)
- Samsung KODEX US Nasdaq100 Futures ETF H (304940)
Both funds do what they say on the tin, providing exposure to Treasury futures and Nasdaq futures respectively. We’re unsure who these funds will perform and confused by where the market will be for them. But the Korean ETF market is a different place.