The month of May is always the focus of investors’ attention thanks mainly to the popular trading maxim, “Sell in May and Go Away.” This hints at the seasonal un-favorability in the investing world as indicated by the historical underperformance. Though the return of the broader U.S. market index S&P (almost flat in May) appeared to corroborate this investing proverb, other corner of the investing world behaved differently (read: Don't "Sell in May and Go Away": Follow 3 ETF Strategies).
We are not sure if the S&P’s meager gains were only reflections of the historical trend or if it was because of the inflated volatility in the market on rate hike worries. But this did not keep investors from enjoying huge returns from other asset classes or global markets in the month. Below we highlight a few areas and the related ETFs that emerged winners in this apparently cursed month.
The year 2015 has so far been favorable for the China A-shares ETFs space. As much as the economy divulged lackluster data points, the case for aggressive monetary easing became stronger. In fact, the Chinese government already launched back-to-back rate cuts in last few months along with several other measures that may boost the country’s rural and domestic operations (read: 3 Best Performing ETF Sectors of Q1 2015).
While almost all Chinese equities ETFs stood out this year, A-shares were the winners. After staging an award-winning performance in Q1 of 2015, the segment carried the momentum in the first two months of Q2 as well. Investors should note that China A-Shares market was previously closely held and was hardly accessible to Western investors. But a new link between Hong Kong and the Mainland put the space in the limelight (read: Best and Worst ETFs of April).
Among the toppers in May, Market Vectors ChinaAMC SME-ChiNext ETF (CNXT) and db X-trackers Harvest CSI 500 China-A Shares Small Cap Fund (ASHS) deserve special mention having returned around 29% and 24% in the month. Moreover, iShares MSCI China Small-Cap ETF (ECNS - Free Report) , KraneShares Bosera MSCI China A Share ETF (KBA - Free Report) , db X-trackers Harvest CSI 300 China A-Shares Fund (ASHR) and Market Vectors ChinaAMC A-Share ETF (PEK) also got places within the top-10 performers list of the month.
Speculations over the faster-than-expected Fed rate hike have been swinging back and forth for long. While the hearsay took a backseat after the Fed’s March meet, wherein it pointed to the possibility of a delayed rate hike given the soft U.S. economic growth, some sturdy economic readings fueled the longstanding talks about policy normalization.
During May, the yield on the 10-year Treasury note touched the highest point of the year at 2.28% (as on May 11, 2015) weighing on U.S. treasuries. As a result, investors took the route of shorting treasuries making Barclays Inverse US Treasury Aggregate ETN (TAPR) one of the top picks. TAPR was up over 14% in May though it was down over 7% in the last five trading sessions (as of May 28, 2015) (read: As Rates Rise, is it Time for TAPR ETF?).
Natural gas was an all-star performer in the last month’s trading as the natural gas ETPs, iPath Dow Jones-UBS Natural Gas ETN (GAZ - Free Report) and United States Natural Gas Fund (UNG) gained close to 12% and 11.5% respectively in the past month.
As per Market Realist, among a host of factors that played a role in sending the commodity higher, lower-than-expected stockpiles data produced by EIA and the forecast for a warmer weather appeared as the main driving forces. As we know, a warmer weather instigates higher cooling demand and, in turn, the demand for natural gases.
However, after stumping investors in May, natural gas exchange-traded products, which were expected to be on a darker side, now exhibit a downtrend. GAZ and UNG were down 4% each in the last five trading sessions (as of May 28, 2015).
Biotech is another sector that managed to become a rising star in May. The space soared on favorable industry dynamics, increasing mergers as well as successful drug trials, the last being the most important criterion. As a result, ALPS Medical Breakthroughs ETF (SBIO) which targets companies with one or more drugs in Phase II or Phase III FDA clinical trials returned about 11.5% in May.
Another fund BioShares Biotechnology Clinical Trials Fund (BBC) also added considerable gains of 8.5% in the month. The ETF provides exposure to the companies that have a primary product in Phase I, II, or III of FDA trials (read: Dyax HAE Drug Result Fuels Three Biotech ETFs).
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