Writing recovery with BIC

According to Shawn McCarthy in his article in the Globe and Mail Saturday Sept 12, 2009, Brazil, India and China are all expected to post solid growth rates for 2009. “Russia remains the outlier in the group – its economy contracted by 10.9% annualized in the 2nd quarter, and is forecast to shrink by 7% on the year.” Hence, BIC is writing the recovery.

Taken from the Claymore website, the Claymore BRIC ETF (CBQ) seeks to provide long-term capital growth by replicating, net of expenses, the performance of BNY Mellon BRIC Select ADR index. The index tracks the performance of companies from Brazil, Russia, India and China which trade as American depository receipts (ADRs) and/or Global depository receipts (GDRs) on a U.S. stock exchange. The exposure to Brazil is 52.12%, China is 34.39%, India is 10.27% and Russia is 3.21%. The top sectors include Energy at 30.78%, Telecommunications at 17.78%, Materials at 15.39% and Financials at 17.34%.

The CBQ has posted over an 80% gain since the low in March and over 50% since the beginning of the year. In early March, the current price crossed the 50 and 100 day moving average and eventually crossed the 200-day moving average in early May. We aren’t getting any reading from relative strength or volume indicators, however moving average convergence divergence (MACD just turned positive. The current price has maintained its position above the 50, 100 and 200-day moving averages which is bullish.

Although this all looks positive for developed countries, a word of warning from Peter Hall, chief economist with Export Development Canada, “We’re not going to get a global recovery until we see Western consumers spending again.” Shawn McCarthy notes, “But with the exception of Brazil, most emerging economies remain heavily dependent on Massive stimulus programs for their resurgence and will eventually require reenergized consumers in developed countries to sustain their recoveries.” Canada is likely to benefit from rising prices for commodities like oil and materials. All said, bet on writing with BIC.