The name and ticker symbol are potentially confusing in this case, so let’s begin by clarifying.  Indxx is the name of a company that provides, among other things, an index of infrastructure-related companies based in India.  INXX is the ticker of the new ETF that tracks this index.

As of the most recent quarter-end, the largest industry weighting in the index was Electricity at 23%, followed by Construction & Materials with 19% and Industrial Metals & Mining at 13%.  The index includes a total of 30 stocks, most of which are probably unfamiliar names to many U.S. investors.

• GAIL India 6.73%
• Larson & Toubro 5.53%
• Jindal Steel & Power 5.51%
• Bharat Heavy Electricals 5.47%
• Tata Power Company 5.13%

The index holdings have an average market capitalization of about $12 billion and a price/earnings ratio around 20.  Emerging Global Shares has agreed to partially waive its fees until January 26, 2011.  Excluding the waiver, INXX has an estimated gross expense ratio of 1.58%, and 0.85% after the waiver.

For more information, you can visit the INXX page at the Emerging Global Shares web site.

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

ELD is very similar to Market Vectors Emerging Markets Local Currency Bond ETF (EMLC), which also came out recently (7/23/10).  Both seek to own a portfolio of emerging market government debt denominated in local currency rather than U.S. dollars.  As noted in our story on EMLC, this gives investors exposure to foreign exchange risk as well as credit risk.  Whether these risks will carry a commensurate reward is not yet known.

There is an important difference between EMLC and ELD, however.  The WisdomTree ETF is actively managed.  The fund manager has flexibility to change the country weightings on short notice instead of being tied to an index like EMLC.  This could prove helpful in the event of a sovereign debt crisis tied to a particular market.

Top country weightings in ELD are Brazil, Mexico, Indonesia, Malaysia, Thailand, Turkey and Korea.  The expense ratio is projected to be 0.55%, slightly higher than EMLC, but the final yields both look like they will be similar at around 6% currently.  This is far more than can be found in developed country government bonds – which may be one reason ELD attracted significant assets so quickly.

More information can be found on the WisdomTree site’s ELD summary page.

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

Represented by the symbol “Li,” lithium is the lightest and least dense of the solid elements. Lithium production has been growing for decades thanks to its use in small batteries.  Powering a car with electricity takes more than a few AAA cells, but it can be done.  The idea is increasingly popular as oil prices remain historically high.

This is good news for Chile. This slender South American country is the largest lithium producer in the world.  It is also good news for Sociedad Quimica y Minera de Chile ADR (SQM), often referred to by its English translation of Chemical & Mining Co. of Chile (SQM). The firm is a top holding in the first lithium-specific ETF. Obviously, the boom in lithium demand could be a boon for SQM. Driven by demand for hybrid and electric cars, lithium demand is expected to swell to 250,000 tons annually up from current levels of 100,000 tons.

Wall Street is taking note of the bullish trend. Several analysts think SQM could make its way to $70, well above the $36 area where the stock currently trades. UBS analysts put a $73 price target on SQM earlier this year.

SQM plans to invest $350 million to bolster its lithium production.  This may lead some investors to look at SQM as a company focused solely on lithium, but that’s not the case. SQM also offers investors significant exposure to increased global food demand. The company is one of Latin America’s top fertilizer producers, competing with the likes of Agrium (AGU) and Potash (POT). The fertilizer exposure highlights the diversity of SQM’s business model.  Investors are buying much more than lithium when they purchase SQM shares.

That said, it looks like lithium demand is driving SQM, at least in the short term. Last week, the company said it is talking with several Japanese automakers about their lithium needs. SQM is in what Fox Business News called “deep” discussions with Nissan. A sales agreement with Nissan to supply the Japanese auto giant with 10,000 tons of lithium per year could boost SQM’s top line by $55 million per year.

Valuations reflect that as SQM trades at 23.5 times forward earnings, but that really isn’t too rich as far as true growth stocks are concerned.  SQM has undergone a strong runup in July and may be vulnerable to a short-term pullback, although it should find support at $34.  To capitalize on rising lithium demand while still remaining diversified with fertilizer, go with lithium producer SQM.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

EMLC seeks to replicate the price and yield of the J.P. Morgan GBI-EMG Core Index, which in turn tracks the performance of local currency bonds issued by emerging market governments.  Top country weightings, capped at 10% each, include Brazil, Malaysia, Mexico, Poland, South Africa and Thailand.  Others in the portfolio are Colombia, Egypt, Hungary, Indonesia, Peru, Russia and Turkey.

The unique point about EMLC is that it holds bonds denominated in the local currency of all these countries.  The two nearest competitors, iShares JPMorgan USD Emerging Markets Bond (EMB) and PowerShares Emerging Markets Sovereign Debt (PCY) are both devoted to similar bonds that are issued in U.S. Dollar terms.  Whether this is a plus or minus depends on your outlook for the the greenback.  EMLC is, in effect, a bet that the dollar will fall in value vs. emerging market currencies.  If the bet pans out, EMLC investors will enjoy capital gains from the currency appreciation as well as what appears to be a very attractive yield, presently around 6% after the 0.49% expense ratio is subtracted.

The other side of this coin, of course, is that the dollar could strengthen in comparison to emerging markets currencies, in which case foreign exchange losses might quickly surpass the yield.  There is, of course, no way to know what will happen to the dollar or any other currency in the future – which means EMLC is far more than just a conservative income investment.  As Van Eck says in the fine print, “investments in emerging markets securities are subject to elevated risks which include, among others, expropriation, confiscatory taxation, issues with repatriation of investment income, limitations of foreign ownership, political instability, armed conflict and social instability.”

Given this laundry list of potential catastrophes, one might reasonably ask whether a 6% yield is really sufficient.  Nonetheless, EMLC may have a place as a small slice of a diversified portfolio.  For more information you can consult the EMLC page at the Van Eck web site.

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

The new funds are:

• Direxion Daily Retail Bull 2x Shares (RETL) (overview page)
• Direxion Daily Retail Bear 2x Shares (RETS) (overview page)
• Direxion Daily Natural Gas Related Bull 2x Shares (FCGL) (overview page)
• Direxion Daily Natural Gas Related Bear 2x Shares (FCGS) (overview page)

RETL and RETS are benchmarked to the Russell 1000 RGS Retail Index, which consists of the Russell 1000 constituents from the retailing sector.  Top holdings include Wal-mart (WMT), Target (TGT), Home Depot (HD), Lowes (LOW), Amazon.com (AMZN) and about 40 others.

FCGL and FCGS are benchmarked to the ISE-REVERE Natural Gas Index.  This is not an index of natural gas itself, but of companies involved in the natural gas business.  The index consists of 30 stocks, mostly based in North America.  The First Trust ISE-Revere Natural Gas Index ETF (FCG) is an unleveraged ETF tracking the same index.  The June 2010 overview report from the ISE says the index follows an equal-weighting methodology, which would seem to suggest the stocks should all have a weighting of around 3.3%.  The constituent list shows only 29 holdings and ExxonMobil (XOM) had a 6.8% allocation as of June 30.  XOM seems to get a double share for some reason. 

As was the case with Direxion’s BRIC and India fund pairs launched back in March, today’s batch offers only 2x leverage rather than 3x like most of the Direxion ETFs.  While I haven’t heard any official explanation from the company, it looks like Direxion is moving toward lower leverage in its product line.  This could be due to operational constraints, liability concerns, or an analysis that 2x offerings actually generate more profit for the firm.  We also know that the SEC is giving new leveraged products some extra scrutiny this year, which may play a part.

Just like most other leveraged ETFs, the new Direxion Shares have a daily leverage reset, meaning that results over periods of more than one day can vary dramatically from the benchmark.  These funds are best used for short-term trading rather than as long-term investments.

Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

We see here a good example of first-mover advantage in ETF marketing. GLD came out in November 2004, and as the first such product made quite a media splash at the time. IAU came along a few months later, but by then the ticker GLD was firmly imprinted in trader’s minds. It doesn’t hurt that the letters G-L-D spring to mind a lot faster than I-A-U when you want to buy G-O-L-D.

While iShares is still the leader in overall ETF assets, new owners BlackRock apparently want to dominate each individual segment as well. To that end, the firm recently announced a 10-for-1 split in IAU shares. The split will be effective after the close on June 21, 2010.

As in stocks, ETF share splits do nothing to directly increase the value of your investment. Instead of owning one $120 share, you will have ten $12 shares. So why is iShares doing it? The lower price may enhance liquidity, since smaller players will be able to take advantage of the creation/redemption mechanism. On the other hand, large investors who typically pay trading commissions at a per-share rate will actually be encouraged to abandon IAU for GLD – which will still have a share price in the $120 range.

Maybe I am missing something here, but to me it looks like iShares is flailing. Someone at the top is annoyed to be so far behind SPDR in this asset class, and they can’t figure out any other ways to distinguish their offering. The supreme irony is that if the split does somehow help IAU attract assets, SPDR can simply execute the same kind of split in GLD.

Disclosure covering writer, editor, and publisher: Long GLD. No other positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

CORN is essentially a way to repackage corn futures so they can be traded as securities on the NYSE Arca Exchange.   Fund assets are allocated into three different corn futures contracts and should, more or less, reflect movements in the price of corn.  Why should we care about corn?  Aside from corn’s many and varied uses in human and animal food products, it is used in the production of ethanol fuels.  The U.S. now has 140 facilities that produce more than 8 billion gallons of ethanol each year.  Corn is one of the primary ingredients.  Most vehicles will not run on pure ethanol, but it can be mixed with gasoline.  I’ve noticed that most service stations in my area now have little stickers on the pumps informing us their gas “may contain up to 10% ethanol.”

CORN is not the first grain-oriented ETP, but it is the first to focus on just corn.  The prospectus suggests the sponsor may be planning additional funds covering other futures contracts.   Relative to stocks and bonds, or even some other commodities like crude oil, corn is a relatively thin market.  This fund could easily begin bumping into CFTC position limits if it attracts significant assets.  It will also run into the same kind of roll risk that I mentioned in my recent post on the U.S. Brent Oil Fund (BNO).

By ETF standards, CORN will have a rich expense ratio estimated at 1.71%.   Investors who want to speculate in long-term corn trends without the hassles of a futures account may find CORN to be a useful tool.  More information can be found on the Teucrium Corn Fund home page and fact sheet.

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

PICB will attempt to reflect the performance of the S&P International Corporate Bond Index.  This index is composed of investment-grade corporate debt from non-U.S. issuers in the G-10 currencies.  This includes the Australian, New Zealand and Canadian Dollars; the Euro; the Norwegian, Danish and Swedish Krone; the British Pound, Japanese Yen, and Swiss Franc.

The index is constructed with a methodology that removes the lower-yielding bonds at each monthly rebalance.  The aggregate weight of any one currency cannot exceed 50% as of each rebalancing.  All holdings must be rated investment-grade by either Standard & Poors or Moody’s.

According to the index fact sheet from S&P, highest country weightings as of May 3, 2010 were the United Kingdom (21.5%), Netherlands (16.5%) and France (10.3%).  This places 48.3% of the index in corporate bonds from these three European nations.  Total Europe exposure adds up to 77.7%, with the remainder coming from Australia, Canada, Japan and New Zealand.  The so-called PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) had a 12.6%  allocation. 

PICB will compete with the recently-launched SPDR Barclays Capital International Corporate Bond ETF (IBND).  As we noted at the time, IBND actually has significant exposure to U.S. companies via bonds issued in other currencies.  PICB is therefore a more “international” portfolio despite the heavy concentration in Europe.

PICB is too new to have a yield estimate, but the underlying index shows a yield to maturity of 3.58%.  Subtracting an estimated expense ratio of 0.50%, PICB should be yielding around 3%.  Modified duration of the portfolio is 5.47 years.

For more information, visit the PICB summary page at the PowerShares site.

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

BNO comes from United States Commodity Funds, a pioneer in the commodity ETF niche.  The firm now offers eight energy-related funds covering crude oil (BNO, USO and USL), inverse crude oil (DNO), natural gas (UNG and UNL), heating oil (UHN) and gasoline (UGA).

BNO differs from similar products in the particular type of oil futures it seeks to track.  Brent crude comes from Britain’s North Sea and is priced at the port of Sullum Voe in the Shetland Islands.  The more familiar West Texas Intermediate crude is priced for delivery at Cushing, Oklahoma.  While both contracts follow a similar course over time, they can vary in the short-term.  This, the sponsor must hope, will provide a reason for traders to use BNO.  I’m not so sure; anyone sophisticated enough to care about the difference between Brent crude and Light Sweet crude is probably sophisticated enough to have a futures account.  We’ll see.

The BNO launch my also be related to the CFTC crackdown on speculative position limits that has reduced the potential asset base for such funds.   If USO and USL need to close to new investments, the firm will have BNO available to keep gathering assets.

I will also be interested to see how BNO handles the “roll risk” problem that has plagued other futures-based products.  BNO will own futures positions in the current and next contract months.  This means that once a month the fund will need to sell its position and replace it with another one two months out.  No matter how adeptly this is done, small losses are common in such transactions.  Over time they add up, and it is a major reason funds like USO have had a hard time tracking the oil price over long periods.

For more information, visit the BNO Summary Page.

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

According to the ESG Shares web site, the firm will offer three different ETFs.

• North American Sustainability Index ETF (NASI)
• Europe Asia Pacific Sustainability Index ETF (EAPS)
• FTSE Environmental Technologies Index ETF (ETFY)

As of today, only NASI appears to be trading. The other two are due out soon. They will face competition for the dollars of socially responsible investing: ETFs in this space are already offered by iShares, PowerShares, and Market Vectors. Each covers a slightly different niche, however, so ESG may be able to gain a foothold.

NASI will attempt to track the FTSE KLD North American Sustainability Index. The index includes equity issuers organized or operating in North America and is adjusted annually using a proprietary KLD methodology. Environmental, Social and Governance factors are all taken into account. The index is float-adjusted, capitalization-weighted, and sector-neutral. The latter means that sector allocations are adjusted in an attempt to match overall market sector weightings.

Top holdings in the index are all familiar names: Proctor & Gamble (PG), Johnson & Johnson (JNJ), International Business Machines (IBM), Wells Fargo (WFC), and Cisco Systems (CSCO). I was not previously aware that these firms were more socially responsible than any others, but the KLD model obviously thinks they are.

NASI appears to have been seeded with an initial $2.5 million in capital and has an expected expense ratio of 0.50%.

Disclosure covering writer, editor, and publisher: Long WFC. No positions in any of the ETFs mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.