This week the National Federation of Independent Business (NFIB) released its monthly report on Small Business Economic Trends, posting its sixth monthly decline in a row. Poor sales continue to be the most pressing problem facing the small business sector across the United States.
SINGAPOREThis week the National Federation of Independent Business (NFIB) released its monthly report on Small Business Economic Trends, posting its sixth monthly decline in a row. Poor sales continue to be the most pressing problem facing the small business sector across the United States. ….
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– The US dollar Index depreciated 12% from January 2007 to August 2011, while the Bloomberg JP Morgan Asia Dollar Index has appreciated 9% over the same timeframe. The chart illustrates the 14% depreciation the US dollar from May 2010 to August 2011 and the gradual 17% appreciation of the Asia Dollar Index from February 2009 to August 2011.
– On Wednesday, the Asian Development Bank (ADB) cut its 2011 and 2012 growth forecasts for Developing Asia “amid ongoing worries about weak external demand from the United States and Europe”.
– Investors who have a long or short view on the benchmark indices of the United States are able to participate in the up-and-down swings through the Exchange Traded Fund (ETF) products of the Singapore Exchange (SGX).
On 8 September, United States President Barrack Obama presented the American Jobs Act to a joint session of Congress. Economic growth and employment creation continue to dominate the agenda of policy makers in the United States. The US$447 billion American Jobs Act includes four core objectives that are “fully paid for as part of the President’s Long-Term Deficit Reduction Plan”. As outlined in the White House American Jobs Act fact sheet, these objectives are:
Tax Cuts to Help America’s Small Businesses Hire and Grow;
Putting Workers Back on the Job While Rebuilding and Modernising America;
Pathways Back to Work for Americans Looking for Jobs; and
Tax Relief for Every American Worker and Family.
This week, the National Federation of Independent Business (NFIB) released its monthly report on Small Business Economic Trends, posting its sixth monthly decline in a row. Poor sales continue to be the most pressing problem facing the small business sector across the United States.
The monthly report suggested the sales outlook for small businesses in the united States has consolidated in recent months, while reflecting a marginal improvement over the past twelve months. The marginal improvement, however, is not ceteris paribus, as inflation concerns and concerns for Government regulation and red tape have crept higher over the past twelve months. Nevertheless, the fact that 25% of small businesses voted poor sales as the single most important problem, versus 23% in July 2011 and 31% in August 2010 is important given the small business sector will ultimately be charged with creating employment opportunities should the American Jobs Act receive passage in Congress and the Senate.
The chart below illustrates the lack of progress to date of policy makers reducing the unemployment rate in the United States that increased over 2009. The current rate stands at 9.1%, a contrast to the 4.8% rate in February 2008.
In regards to consumer confidence in the United States, the Department of Commerce reported mid week that retail sales in August were flat on the previous month, with downward revisions to the previous two months. The Conference Board Consumer Confidence Index® now stands at 44.5, down from 59.2 in July.
Looking at month-to-month currency performances, the US dollar Index depreciated 12% from January 2007 to August 2011.Over the same timeframe, the Bloomberg JP Morgan Asia Dollar Index (ADXY) appreciated 9%. The chart illustrates the 14% depreciation of the US Dollar from May 2010 to August 2011 and the gradual 17% appreciation of the ADXY from February 2009 to August 2011.
The ADXY opened yesterday at 117.47, a 1.8% month to date depreciation from the August close of 119.65. The ADXY is a trade and liquidity weighted index that includes the Chinese Yuan, South Korean Won, Singapore Dollar, Hong Kong Dollar, Indian Rupee, Taiwan Dollar, Malaysian Ringgit, Thai Baht, Indonesian Rupiah, Philippine Peso.
On Wednesday, the Asian Development Bank (ADB) cut its 2011 and 2012 growth forecasts for Developing Asia “amid ongoing worries about weak external demand from the United States and Europe”. This ADB report also discussed intraregional trade picking up which may make the region more “resilient to external shocks”.
Investors who have a long or short view on the benchmark indices of the United States are able to participate in the up-and-down swings of this market through the Exchange Traded Fund (ETF) products of the Singapore Exchange (SGX).
The SGX ETF products, which allow investors to trade US market movements during Asian hours, are detailed below.
The iShares S&P 500 Index Fund seeks investment results that correspond generally to the price and yield performance of U.S. large-cap stocks, as represented by the Standard & Poor’s 500 Index. The top holdings of the ETF include Apple, Microsoft and Exxon Mobil.
The DB X-trackers S&P 500 Inverse Daily ETF is a new generation swap based ETF that is INVERSELY linked to the performance of the S&P 500 Total Return index. This ETF is provided for investors with a bearish view of the S&P 500 Total Return Index.
In terms of calculation, db x-trackers note “the Index replicates the performance of an investment with a short position on the S&P 500 TR Index that is rebalanced daily. On a daily basis, the performance of the Index is the negative performance of the S&P 500 TR Index that is rebalanced daily, plus a prorated portion of interest based on double the Overnight USD Libor rate”. The performance of the Index will therefore not be equal to the simple proportionate inverse percentage change of the S&P 500.
The iShares Dow Jones US Technology Sector Index Fund is cash based. The advantages of a cash based ETF is there is little counterparty risk. Furthermore, the cash based ETF is investing into the actual basket of constituent stocks that the ETF is tracking against the benchmark index, meaning the assets of the iShares Dow Jones US Technology Sector Index Fund consist mainly of the constituent stocks of the Dow Jones US Technology Index. The disadvantage of the cash based structure is the propensity for a higher tracking error that is mainly due to the drag from expenses and tax withholdings on dividend payments.
The price and value of all ETFs may go down as well as up and past performance does not guarantee of future returns.
Specified Investment Products
As part of the Monetary Authority of Singapore’s (MAS) initiative to introduce stronger measures and enhance requirements to further safeguard the interests of individual investors, Exchange Traded Funds have been categorised as Specified Investment Products (SIPs).
SGX SIPs have structures, features and risks that may be more complex in nature. From Jan 2012, the MAS will require broking firms to ascertain whether an individual investor has the relevant knowledge and experience to understand the risks and features of SIPs before allowing the individual to open an account to trade SIPs listed on both securities and derivatives markets.
SGX has introduced two online initiatives, a Customer Account Review Module and an Online Education programme, to support individual investors in their understanding and trading of SIPs listed on SGX.
Source: ETFWorld – SGX
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