Question 1
The volume of ASX traded ETF’s appears low. Should I have liquidity concerns regarding this investment type?
There are more than 90 ETFs listed on the ASX, under the category ETP or Exchange Traded Product.
Most of the action is in the broad based Australian share ETFs like State Street’s SPDR (ASX Code STW) or Vanguard’s Australian Shares High Yield (VHY), or one of the broad based international shares ETFs such as iShares US S&P 500 (IVV). Liquidity and the spread between the bid and offer in these ETFs is generally quite good.
However, some of the share sector, currency and commodity ETFs have pretty poor liquidity.
I think it is important to consider who issues the ETF. Some of the issuers take more effort than others in promoting liquidity by arranging “market makers” to make markets. When you have strong market makers, you will find deeper markets with narrower spreads – and hence better liquidity.
The ASX puts out an excellent publication each month that details the key characteristics of each ETF, including the fund inflow, management fee, turnover, average liquidity, average bid/offer spread, bid depth etc. I use this as my guide when considering an ETF. The May edition can be found here.
Personally, I stick with the major ETFs – I haven’t observed the liquidity to venture further yet.
Question 2
Which businesses will do well with a lower dollar?
Thank you for your question. In fact, Geoff Wilson addressed this question in his article last week. You can read that here.
He outlined a number of companies and industries that look set to benefit from a low Aussie dollar. These included companies with overseas assets (News Corporation, James Hardie Industries), exporters (Australian Agriculture Group, Fortescue Metals Group and Atlas Iron Group) and tourism operators (Ardent Leisure, Village Roadshow Limited and wotif.com Holdings).
I hope this helps.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
