Friday’s ETF To Watch: Asia 50 Index Fund (ADRA)

by on November 5, 2010 | ETFs Mentioned:

Now that the Fed has rolled out their plans for the second round of quantitative easing, stock markets have surged. The Dow Jones Industrial Average topped 11,430 yesterday, marking the highest level it has seen since September of 2008. With markets spiking and the Fed planning to spend approximately $600 billion to revitalize our economy, most other financial events will likely stay in the background for the remainder of the week; but there are several important events investors should be aware of [see QE2 Slaughters Long-Term Treasury ETFs].

We are currently exiting the earnings season for the third quarter of 2010, and today marks one of the last industry bellwethers to make a report. Toyota Motor Corporation will be reporting their earnings well before market open today, shedding light onto their performance during unstable times. Analysts estimate the company to haul in an EPS of 0.67 with revenues of $61.62 billion. Investors should note that last quarter, Toyota’s EPS came in 1,100% higher than analyst predictions; along with their four most recent quarter results all being over 150% higher than predicted suggesting that investors could be in for a surprise today as well [see also Embrace QE With These Three ETFs].

It would appear that analysts are low-balling Toyota due to multiple recalls the company has made on several of their vehicles. From late 2009 through early 2010, Toyota recalled over 8 million vehicles due to safety issues on several different models. While this had a major impact on the company’s sales and image, they were able to bounce back, only to make another recall in late October of this year. Though this most recent recall was voluntary, it still raises questions as to how Toyota has managed to keep profits so high amid so many faulty vehicles [see more Who Else Wants An Automotive ETF?].

As Toyota’s results come in, the PowerShares BLDRS Asia 50 ADR Index Fund (ADRA) will be today’s ETF to watch. This ETF tracks the Bank of New York Mellon Asia 50 ADR Index, which is capitalization-weighted and designed to track the performance of approximately 50 Asian market-based depositary receipts. Some of ADRA’s top holdings include Toyota (8.9%), Honda (5.4%), and China Mobile (3.6%). The fund focuses almost all of its assets on giant cap companies, and has a tilt towards the consumer services (27.2%) and financials (23.5%) sectors. Thus far in 2010, ADRA has gained 6.7% while paying out a dividend of 1.3%. If Toyota’s numbers come in strong tomorrow, look for ADRA to have a strong trading day, but if Toyota falls short, ADRA may suffer.

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Disclosure: No positions at time of writing.