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Mar

2011

Full list of VIX ETFs

by Fred Mason

How does the VIX work?

The CBOE Volatility Index is more commonly known as the VIX or the “fear gauge.” When investors get nervous about the market, the Volatility Index reflects that fear by measuring the market’s expectations of near-term volatility conveyed by S&P 500 options prices. The more fear that’s out there, the more churn there is in options prices. A large spike in the VIX usually indicates investors are nervous about the near-term performance of the biggest stocks in the S&P 500.

During last May’s “flash crash,” for example, the VIX spiked to 45. The VIX’s two-year average is around 25, according to Barron’s.

Full list of VIX ETFs and ETNs (ranked by volume)

iPath S&P 500 VIX Short-Term Futures ETN (NYSE:VXX), average volume 19.9 million: Offers a daily long position in VIX futures contracts that are designed to reflect the implied volatility of the S&P 500 Index. The index is considered a short-term futures ETN since contracts roll continuously throughout each month from the first month VIX futures contract into the second month VIX futures contract. Specifically, the focus is on volatility that is expected to occur over the next 30 days.

iPath S&P 500 VIX Mid-Term Futures ETN (NYSE:VXZ), average volume 746,000: VXZ operates similarly to VXX, but instead of rolling futures contracts from the first month into the second month, VXZ rolls contracts from the fourth month into the seventh month. The focus isn’t so much on volatility in the current month, but rather on volatility a few months down the road. VXZ tends to be slightly less volatile than VXX.

VelocityShares Daily 2x VIX Short Term ETN (NYSE:TVIX), average volume 157,800: TVIX seeks a yield that’s twice (2X) the daily performance of the S&P 500 VIX Short-Term Futures Index. The moves in the VIX should be compounded 100 percent by TVIX. It’s leveraged fear at its best.

ProShares VIX Short-Term Futures ETF (NYSE:VIXY), average volume 45,500: VIXY is linked to the performance of the S&P 500 VIX Short-Term Futures Index.

ProShares VIX Mid-Term Futures ETF (NYSE:VIXM), average volume 6,400: VIXM is linked to the performance of the S&P 500 VIX Mid-Term Futures Index.

iPath Long Enhanced S&P 500 VIX Mid Term Futures ETN (NYSE:VZZ), average volume 6,400: VZZ is linked linked to a leveraged return (2X) on the performance of the S&P 500 VIX Mid-Term Futures Index.

VelocityShares Daily Long VIX Short Term ETN (NYSE:VIIX), average volume 2,150: VIIX is linked to the daily performance of the S&P 500 VIX Short-Term Futures Index.

VelocityShares Daily 2x VIX Medium Term ETN (NYSE:TVIZ), average volume 1,345: TVIZ is linked to twice (2x) the daily performance of the S&P 500 VIX Mid-Term Futures Index. I’d stick to an ETN with a much higher trading volume so you can move in and out of your position quickly.

VelocityShares Daily Long VIX Medium Term ETN (NYSE:VIIZ), average volume 100: VIIZ is linked to the daily performance of the S&P 500 VIX Mid-Term Futures Index. Like TVIZ, anemic trading volume makes me want to turn around and run from VIIZ – no matter how volatile the futures market is.

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Tags: Vix, volatility
Posted in ETFs, NYSE, ProShares, stock tips, trading stock | 1 Comment »

Feb

2011

Time to short Demand Media, Inc. (NYSE:DMD)?

by Fred Mason

Late Thursday night, Google, Inc. (NASDAQ:GOOG) uploaded a fairly innocuous-sounding blog post titled “Finding more high-quality sites in search.” In the post, Google wrote that “in the last day or so we launched a pretty big algorithmic improvement to our ranking — a change that noticeably impacts 11.8% of our queries.”

The update was targeted at reducing search results for low-quality sites. Sounds reasonable. What Google doesn’t specifically say though is that the move is widely viewed as a response to a chorus of reporters and bloggers who have complained about “content farm” pollution on Google.

One of the chief targets of that content farm rage is Demand Media, Inc. (NYSE:DMD) – a company that had its IPO on the NYSE late last month. Demand Media pays an army of freelancers to churn out short articles that are written to rank highly in Google’s search results. Specifically, Demand Media produces “How To” articles for eHow.com to capitalize on the large number of “How To” searches that web users perform online.

The net result is you can type in just about any “how to” query into Google and see an eHow.com page near the top of Google’s search results. Because Demand Media pays just $15 per article, a lot of Web surfers complain about the quality of the articles. Google’s “algorithmic improvement” appears to be targeted at Demand Media and related sites including Yahoo! Inc.’s (NASDAQ:YHOO) Associated Content. The implicit message is, eHow and Associated Content articles are going to start appearing lower in Google’s search results. That means far fewer page views, and fewer page views means fewer ad clicks, which could hurt the bottom line for both companies.

For its part, Demand Media quickly responded to Google’s blog post with a post of its own. “It’s impossible to speculate how these or any changes made by Google impact any online business in the long term – but at this point in time, we haven’t seen a material net impact on our Content & Media business,” writes Larry Fitzgibbon, Demand Media’s EVP of Media and Operations.

Fitzgibbon goes on to say that the company isn’t reliant on Google alone for search. People looking for How To articles sometimes skip Google altogether and go directly to eHow.com, Fitzgibbon says. Repeat visits and visits from social networking sites like Facebook make up another big chunk of visits to the site, too. Still, it’s undeniable that Google plays an outsize role in Demand Media’s success.

During Q3 2010, search engines generated 41 percent of Demand Media’s traffic, according to IPO documents, most of which came from Google. Ad arrangements with Google also accounted for 28 percent of the company’s revenue. Those are big numbers that could mean the difference between a profitable company and a sinking ship.

I’m definitely not buying Demand Media shares right now, but I’m not convinced they’d make a good short, either. A company doesn’t exist in a vacuum, and they’re continually tasked with adjusting to a changing market. If eHow’s results get pushed off the first few pages of Google’s search results, I’d be running for the hills, but a move like that makes little sense for Google. Google’s tasked with providing relevant search results. For obscure searches like “How to Fix a Dishwasher That Makes Weird Noises,” eHow’s content might be the most relevant and informative content online. So long as their content is worthwhile for at least a handful of surfers, Demand’s pages will continue to be returned in Google’s search results.

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Tags: DMD, GOOG, search engines
Posted in Demand Media, Internet stocks, IPOs, NYSE, stock tips, tech stocks, trading stock | No Comments »

Feb

2011

In 2011′s large cap vs. small cap stocks battle, bet on bigger names

by Fred Mason

One of the fundamental differences between successful investors and mediocre investors is the ability to protect assets. Even with the S&P 500 returning 12 percent last year, trillions of dollars sat languishing in money-market accounts earning interest rates around 1 percent.

The wealthy are more keen on protecting their capital than they are on putting it in jeopardy. That’s what made them rich in the first place, and it’s also why many analysts are calling for 2011 to be a banner year for large-cap stocks. Signs are already surfacing that money’s flowing back into the markets after an extended period on the sidelines.

Since early December, Americans have moved $83 billion out of money market accounts. A lot of that money ended up in stocks. According to the Financial Post, investors poured $23 billion into mutual funds in January. That was the biggest monthly inflow since February 2007.

Wealthy investors are also ditching bonds in favor of stocks. Larry Palmer, a managing director for Morgan Stanley Smith Barney Private Wealth Management Several, tells the Post that several clients sold half their bond portfolios over the past two months and invested the proceeds in large-cap dividend-paying U.S. stocks.

Big Money likes big margins of safety, and rock-bottom valuations have a lot of large-cap stocks looking attractive right now. Big Money’s also particularly adept at recognizing when shares are under-valued.

“Ten years ago, if you were looking for relatively low valuations, your search would have led you to smaller stocks, and you would have enjoyed a decade of outperforming the broad market,” writes Matt Koppenheffer at Fool.com. “Right now, larger stocks carry the more attractive valuations – CVS (NYSE:CVS) has a P/E of just over 13 and Ford (NYSE:F) changes hands at less than nine times its earnings – and I think will enjoy better returns when the trend reverses.”

Here are three more reasons 2011 just might stack up to be the year of the large-cap stocks:

1) A crumbling dollar. The rapid decline of the dollar has shares on American exchanges looking cheap. Foreigners who buy in now, could reap gains in stock prices AND currency appreciations if and when the Fed starts tightening interest rates. Mike Hawkins, head of private clients at Evans and Partners, went so far as calling it a “once-in-a-generation opportunity” for Australian investors.

2) Margin of safety. The political turmoil in the Middle East could put long-term pressure on stock prices. In general, large cap stocks lose less than small cap stocks as investors shift money into safer assets during periods of uncertainty.

3) Large caps are “as cheap as they ever get.” “These stocks are not just a little cheap, they are almost as cheap as they ever get, relative to the rest of the market,” Jeremy Grantham, chief investment strategist for Boston-based Grantham, Mayo, Van Otterloo & Co., tells the Post. The blistering gains we’ve seen in small-cap stocks have lured investors away from big companies with great revenue streams, and this just might be the year when that trend reverses itself.

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Tags: large-cap stocks, small-cap stocks
Posted in NYSE, stock tips, trading stock | No Comments »

Feb

2011

Net income at Noah Holdings (NOAH) up 88 percent

by Fred Mason

First off, this disclaimer: Noah Holdings Limited (NYSE:NOAH) is one of the biggest holdings in my portfolio right now. A wealth management company that serves high-net-worth individuals in China, Noah released 4Q earnings last night. Analysts were spot on with their calls. The company reported $0.09 earnings per share, which met the Thomson Reuters consensus estimate of $0.09, according to AmericanBankingNews.com.

Net revenues at the company shot up 157 percent from $5.4 million in Q4 2009 to $14 million in Q4 2010. Over that same time span, net income attributable to shareholders rose 88.9 percent to $4.2 million. Those are heady numbers, and so are the company’s expectations for the rest of the year. Noah forecasts non-GAAP net income attributable to shareholders to hit a year-over-year increase in the range of 56.7% and 86.6%.

Analysts are also positive on the stock. JPMorgan Chase & Co. (NYSE: JPM) initiated coverage on Noah Holdings with an Overweight rating and a $22.00 price target last month. Bank of America (NYSE: BAC) analysts currently list Noah as a Buy with a $22.20 price target.

Both targets are more than 40 percent higher than the stock’s current price at $15.43. Apparently, I should have waited to buy my shares, which are down 3.5 percent since opening day, but I’m definitely not worried about the company’s long-term prospects.

There’s much talk about China’s burgeoning middle class, but, if luxury purchasing is any indication, the ranks of the upper class are swelling even faster. A new report by broker CSLA forecasts overall consumption in China will rise 11 percent per year over the next five years. Sales of luxury goods are expected to grow more than twice as quickly, by 25 percent a year.

“The wealth of China’s upper-middle class has reached an inflection point, reckons [the author of the CSLA report] Mr. Fischer. They have everything they need,” The Economist writes. “Now they want a load of stuff they don’t need, too.”

With great wealth comes the desire to make even more of it, and Noah appears perfectly positioned to help China’s newest millionaires amass even more cash.

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Tags: BAC, JPM, NOAH
Posted in BAC, Bank stocks, Chinese stocks, financial stocks, investment banks, IPOs, NYSE | No Comments »

Feb

2011

After Borders’ demise is Barnes and Noble stock a buy? (BKS)

by Fred Mason

With the bankruptcy of Borders Group, Inc. (NYSE:BGP), Barnes & Noble, Inc. (NYSE:BKS) stands alone as the clear market leader in the brick-and-mortar bookstore business. That’s not without good reason. Barnes and Noble has simply proven nimbler in a rapidly-changing market.

When Amazon.com, Inc. (NASDAQ:AMZN) released its Kindle e-reader in 2007, the device was a phenomenal success selling out in five and a half hours. Barnes and Noble began work on their answer immediately: an e-reader called the Nook that runs on Google’s Android operating system. The Nook hit shelves almost two years to the day after the release of the Kindle.

Still, it’s not clear that the Nook and the demise of a major competitor is enough to keep Barnes and Noble afloat in an industry with declining sales. Here are some key facts to consider when thinking about buying Barnes and Noble shares:

Market share: The Nook currently controls 22 percent of the e-reader market, according to Goldman Sachs Group, Inc. (NYSE:GS). That’s a distant second to the Kindle’s 67 percent market share.

No more dividend: Shares in Barnes and Noble tumbled more than 14 percent yesterday on news that the company is suspending its annual $1 dividend. BKS will also suspend forecasting profits as it negotiates the fallout from Borders’ bankruptcy. The good news? Withholding that dividend will give the company an extra $60 million to use for investments or changes in strategy.

Sales: Barnes and Noble has underperformed analyst expectations for the past four quarters. Investments in the company’s digital platform led to a loss of $14.5 million in the nine months through January, according to Bloomberg.

For sale sign in the parking lot: Barnes & Noble put itself up for sale in August. When the news leaked, shares shot up some 25 percent, but a suitor was never found. “We assign a 30 percent probability to a transaction, recognizing potential challenges in financing a transaction and the potential lack of other bidders,” Goldman Sachs analyst Matthew Fassler told MarketWatch at the time. “We don’t see compelling value in the business.”

Don’t mess with my Nook: At the moment, digital book sales don’t add much to Barnes and Nobles’ bottom line. The company predicts it’ll generate $400 million in revenue this fiscal year from the Nook, and that will amount to 5.6 percent of the company’s $7.1 billion in annual sales expected by analysts, Bloomberg reports. Still, the growth in e-book sales has been phenomenal, shooting up more than 100 percent from $169.5 million to $441.3 million last year. The Nook also has an advantages over the Kindle with its color display and the ability to market its products in the store’s more than 700 locations and college campus bookstores.

The future: It’s clear that Barnes and Nobles’ future remains tied to the company’s success in the digital space. If the Nook can steal more market share from Amazon’s Kindle, it might be enough to keep the chain afloat. Whether Barnes and Noble can do that while still maintaining healthy relationships with publishers, writers and distribution platforms like Apple’s iTunes remains to be seen, though. Not to mention, the company will soon be competing with a leaner and meaner Borders Books. Predicting the outcome is a bit like trying to guess which character dies in a Harry Potter novel, but I do know that the road ahead is going to be bumpy and steep.

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Tags: AMZN, BKS, Borders, GS, Kindle, Nook
Posted in NYSE, retail stocks | No Comments »

Feb

2011

HDFC Bank turns dominant in India’s credit card market (HDB)

by Fred Mason

With rising defaults on personal loans in India, the country’s credit card market has undergone subtle but seismic shifts over the past two years, and it’s beginning to look like HDFC Bank Limited (NYSE:HDB) is poised to come out on top. The company defied market expectations last quarter by reporting a 33 percent rise in net profits.

The number of active credit cards in India has tumbled since March of 2008 from 20.75 million to 10.82 million as of November 2010, according to the Times of India. Unlike most domestic and foreign banks operating in the country, though, HDFC has aggressively grown it’s credit card portfolio.

“Industry officials estimate that HDFC Bank is nearing leadership position, followed by ICICI Bank (ICICI Bank Limited, NYSE:IBN) and SBI Cards,” Mayur Shetty writes in the Times. “Although HDFC has been the most aggressive in card issuance, its card customers are predominantly account holders in the bank.”

Rising interest rates and higher commodity prices will likely crimp borrowing going forward, but the Head of Equities at Ambit Capital, Saurabh Mukherjea, expects HDFC to outperform the sector.

“There will be consensus pullbacks in our FY12 economic growth rates and the banking sector will see some pullback on the back of that,” Mukherjea told the Economic Times. “But by and large the higher quality banking names, HDFC in particular, will outperform the rest of the sector as we enter a softer period from an economic growth perspective.”

The Royal Bank of Scotland ranks HDFC highest among private-sector banks in India, according to Reuters. Analysts there have retained a “buy” rating on HDFC, “hold” on ICICI Bank and “sell” on Axis Bank (AXBK.BO).

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Tags: HDB, IBN
Posted in Bank stocks, credit card stocks, financial stocks, India stocks, investment banks, NYSE | No Comments »

Jan

2011

Five stocks picks for 2011 from John Paulson

by Fred Mason

Hedge fund manager John Paulson became an icon in the investing world when he made a huge wager against subprime mortgages in 2007. That year, his funds gained as much as 590 percent, according to the Wall Street Journal.

Paulson’s 2010 returns ranged between 11 percent and 45 percent compared with the 15 percent gain the S&P locked in. That was enough to net Paulson himself some $5 billion. Here’s a look at where he’s making his bets for 2011:

1) Precious metals. For several years now, Paulson’s been urging investors to buy gold. Just based on monetary expansion alone, he said last year, gold could hit $2,400 an ounce. Tack on significant inflation on top of that, and gold prices at $4,000 an ounce aren’t out of the question. Paulson’s gold positions in 2010 netted him a return of 45 percent, and he’s still optimistic that gold will outperform for the next 5 years calling it “the ideal vehicle to hedge against the risk of the U.S. dollar,” Forbes reports.

Among Paulson’s biggest gold positions last year were AngloGold Ashanti Limited (NYSE:AU), Osisko Mining Corp. (TSE:OSK) and the SPDR Gold Trust ETF (NYSE:GLD). Currently, his funds own securities that represent the rough equivalent of 96 metric tons of the metal, according to the New York Times. That’s more gold than the Australian government holds.

2) Internet security. Of the top positions initiated by Paulson as of Sept. 30, 2010, McAfee, Inc. (NYSE:MFE) made the list. McAfee, which makes antivirus software, firewalls and other software-based security for computers, made headlines after a buyout by Intel Corporation (NASDAQ:INTC) was announced in August. Paulson’s reputation as a macroeconomic investor makes it clear where he sees big opportunities for growth: protecting data from hackers.

3) Oil and natural gas. Paulson has jettisoned his position in banks in favor of energy stocks. Chief among his energy holdings going into 2011? Anadarko Petroleum Corporation (NYSE:APC), the Texas-based oil and natural gas producer. It’s returned 20 percent over the past three months.

4) Biotechs. Genzyme Corporation (NASDAQ:GENZ) also made the list of top stocks that Paulson was acquiring late last year. Another buyout target, Sanofi-Aventis SA (NYSE:SNY) appears close locking in a deal to buy Genzyme. Trend anyone?

5) Housing. Paulson argued late last year that it was the best time to buy a house in 50 years. “If you don’t own a home, buy one,” he said at a lecture for New York’s University Club. “If you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home.” Can’t buy a home? Consider some beat-down real estate or construction stocks. A few good picks and you, too, might be on your way to earning $5 billion a year.

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Tags: APC, AU, GENZ, GLD, hedge funds, INTC, John Paulson, MFE, OSK, SNY
Posted in Bank stocks, biotech stocks, economy, ETFs, financial stocks, gold, gold stocks, healthcare stocks, NYSE, real estate, real estate stocks | No Comments »

Jan

2011

Three reasons to buy stock in Demand Media’s IPO (DMD)

by Fred Mason

You might not have heard of Demand Media Inc. (NYSE:DMD), but you’re probably familiar with the company’s Web site eHow.com. eHow.com harnesses the power of some 13,000 freelancers from around the world to crank out “How To” articles on just about everything – literally.

The company uses search algorithms to figure out what people are searching for online, then they tailor “How To” articles at those searchers. Some recent titles on eHow.com? “How to fix a wet laptop” and “How to make green bean dog treats.” Enticing, right?

eHow has basically turned content into a commodity by cranking out one million articles a month. That’s the equivalent of four English-language Wikipedia’s every year, according to company founder and CEO Richard Rosenblatt. Demand Media sells the articles it produces to other media outlets or it publishes them on eHow.com where the company can reap long-tail advertising revenue presumably for decades into the future.

Demand Media isn’t profitable yet, but that doesn’t mean it won’t be in the future. Here are three reasons to consider buying stock in Demand Media’s IPO:

1) Highly targeted content is extremely valuable to advertisers on the Web. Think about it, if you’re landing on a Web page that’s titled “How to make green bean dog treats,” we can make some logical assumptions about you. Namely, you’re a dog owner who likes giving your dog exotic (and possibly expensive) treats. If I were a manufacturer of high-end dog treats, that’s precisely the sort of page where I’d want my company ad to appear. I’d be willing to pay a decent amount to get my ad there, too.

2) Content as a commodity. I spent a few weeks writing as a Demand Media freelancer last year until I started running out of topics that I could intelligently cover. One of the things I noticed about the freelancing process at Demand Media was the company’s dogged insistence on making sure the content I produced would remain relevant for years – perhaps even decades – to come. Since content on the Web never really goes away, Demand Media pays the upfront cost to have the article produced (a mere $15), and they could – in theory – be making money off that article for the next 100 years. It’s like a legal pyramid scheme that just might be minting cash a someday.

3) International expansion. Demand Media plans to use the cash it raises during the IPO to fund “international expansion, sales and marketing, as well as general purposes,” according to the Wall Street Journal. As the company expands into foreign-language markets, it should be able to exploit years of server logs to see which of its English-language articles have been the most visited and/or profitable. By focusing on those first, they’ll be able to quickly ramp up earnings in brand new markets.

Not convinced? Here are a few reasons to AVOID buying stock in Demand Media’s IPO.

Demand Media’s ticker symbol: NYSE:DMD.

Tags: Demand Media, DMD, ehow.com
Posted in Demand Media, Internet stocks, IPOs, NYSE, private companies, tech stocks | No Comments »

Jan

2011

DangDang (NYSE:DANG) founder labels Morgan Stanley “motherf**kers”

by Fred Mason

If there’s one thing that’s truly refreshing about Chinese tech startups, it’s the fact that the CEOs there aren’t afraid to sound off like teenage boys when they feel like they’ve been wronged. It’s a nice reprise from the overly-sanitized, politically-correct, speak-words-without-actually-saying-anything, VOICE-OF-GOD tone that American CEOs have mastered.

Case in point, the CEO of E-Commerce China Dangdang, Inc. (NYSE:DANG), Guoqing Li, railed publicly against Morgan Stanley (NYSE:MS) over the weekend after watching the Dangdang shares he sold at $16 more than double to $33 in just over a month of trading on the NYSE. The CEO’s fictional “rock song” lyrics don’t pull any punches:

“Lyrics for a rock song: You (Morgan Stanley) gave out a valuation of 1-6 billion, but in Hong Kong the opening statements stated only 0.78 billion, stop f**king acting,” TechRice quotes Mr. Li as writing in his microblog account on the Twitter-like service Sina Weibo. “You f**kers knew first day of launch that valuation would be 2 billion, but you still priced USD 16 per share, which comes to 1.1 billion. My CFO was in panic mode, I held back a breath and silently cursed you motherf**kers.”

“I regret not giving the job to Goldman Sachs,” Mr. Li went on in response to a microblogger identified as a Morgan Stanley employee. “I am here openly criticizing investment banks, criticizing Morgan Stanley, what, Morgan Stanley can’t be criticized? Not be cursed? You foreigners’ flunky!”

Mishi fired back on the Twitter-like microblog platform, Sina Weibo, saying Mr. Li possesses an “IQ so low you don’t even understand the basic principles of being human.”

Morgan Stanley quickly issued a rebuke: “These comments are offensive, highly unprofessional and do not reflect industry practices. We condemn such behavior that can risk damaging a company’s brand and reputation,” the bank said in an official statement.

Now that the IPO silent period is over, it seems the kid gloves have come off. It could be a risky bit of marketing on the part of Mr. Li, or he might genuinely be miffed that he sold a huge stake in his own company for far too little. My guess? It’s a bit of both.

Mr. Li’s smart enough to know that an under-priced IPO can lead to a whole lot of positive PR, but its got to be frustrating watching your shares skyrocket and knowing that you’ve missed out on a few hundred million dollars in your pocket. I think I’d be doing some cursing, too. I just might not have made it public.

Tags: DANG, Dangdang, MS, Sina Weibo
Posted in Chinese stocks, Internet stocks, IPOs, NYSE, tech stocks | No Comments »

Jan

2011

How to buy Chinese Yuan

by Fred Mason

The Chinese yuan or renminbi has risen about 5 percent a year over the past five years, and some investors argue that China’s currency is still undervalued by 40 percent. If the dollar suffers from decreasing purchasing power in the coming years, the yuan could rise rapidly, and that’s got a lot of people looking at the currency as a potential investment (or at least a safe haven). Here are three ways to buy Chinese yuan:

1) Open a savings account with a Bank of China branch that’s based in the U.S. The Chinese government has finally started allowing Americans to invest in the yuan via savings accounts, according to the Wall Street Journal. Visit one of two Bank of China branches in New York (or the branch in L.A.), and you’ll be able to start a yuan-based savings account where you can deposit up to $20,000 a year in $4,000 per day increments.

2) Buy Chinese Yuan currency ETFs. There are at least two ETFs/ETNs that track the yuan. The WisdomTree Dreyfus Chinese Yuan Fund (ETF) (NYSE:CYB) is the most active with an average of 210,000 shares changing hands every day. The second, Market Vectors Chinese Renminbi/USD ETN (NYSE:CNY), has an average trading volume around 62,000 shares per day. The ETFs have largely traded flat since their inception. So long as the yuan remains loosely pegged to the dollar, this probably won’t change, but if the ties between the yuan and the dollar become strained, I expect these two stocks to appreciate quickly.

3) Invest in a Renminbi Non-Deliverable Forward (RMB NDF) currency exchange derivative. That’s a mouthful, but it’s actually one of the most interesting (and cheapest) ways to invest in the yuan. Offered by HSBC Holdings (NYSE:HBC), NDFs let you exchange a “pre-determined amount of Renminbi at a set exchange rate on a fixed date in the future.” If you think the yuan’s going to go up, you can buy expected Renminbi. If you think it’s going down, you can sell expected Renminbi.

This type of derivatives contract has a couple advantages: You just need to put down 25 percent of the contract amount as lien. The minimum contact amount is $10,000, which means you’d only tie up $2,500 in your investment. One bonus: no Renminbi changes hands as all transactions are settled in US Dollars. That means you’re not limited in how much you can buy or sell. You just have to find a buyer or seller and come to an agreement on an exchange rate that you’re comfortable with.

It’s hard telling where the yuan will be a year or two from now, but it’s even harder to imagine that the yuan will go down in that time.

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Tags: China, currency, renminbi, yuan
Posted in Chinese stocks, economy, ETFs, HBC, NYSE | 1 Comment »

Archive for the ‘NYSE’ Category

Full list of VIX ETFs

How does the VIX work?

Full list of VIX ETFs and ETNs (ranked by volume)

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Five stocks picks for 2011 from John Paulson

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How to buy Chinese Yuan

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