Three ETFs To Watch This Week: FXI, FDN, ALUM

by on October 10, 2011 | Updated October 14, 2011 | ETFs Mentioned:

Although stocks started off last week on a down note thanks to growing worries over Europe, markets staged a late session rally in Tuesday trading and carried this into Wednesday and Thursday as well. These gains came on hopes for government support for euro zone banks coupled with relatively solid data from American markets to boost sentiment across a number of industries. Then, on Friday, the employment figure showed a robust increase in nonfarm payrolls, as the consensus of a 65,000 increase was crushed by an actual figure of 103,000. Furthermore, investors also saw the overall unemployment rate edge down slightly to 9.1% while the average workweek also rose, finishing up at 34.3 hours. These bullish reports suggested to many that the economy might be able to avoid a double dip recession, at least for the time being. However, a report from Fitch, which downgraded Italy and Spain, sent markets tumbling and erased much of the optimism from the jobs report heading into the weekend

This week, investors will welcome the return of earnings season as a number of key companies across a variety of industries give their quarterly updates. Including traditional first-to-report company Alcoa, investors will also pay close attention to reports from JP Morgan to get a better handle on the American banking sector, as well as food and beveage giant Pepsi, and tech giant Google. Beyond these key reports, investors will also look to data releases from a number of international markets including CPI from Germany and the euro zone as a whole, as well as a crucial report on loan growth and consumer prices in China. Overall it looks to be a pretty data-filled week giving investors plenty to chew on as we reach the mid-point of October. With this backdrop, investors should look for the following three ETFs to be in for an active week:

iShares FTSE China 25 Index Fund (FXI)

Why FXI Will Be In Focus: Worries continue to grow over the health of the Chinese market as fears over inflation and a hard landing are pushing investors quickly out of this popular product. FXI has lost close to 26% over the past quarter including a nearly 14.7% tumble in the past month alone, suggesting that sentiment is quickly and forcefully going negative on the country. Thanks to this, investors will likely look to two key pieces of data due out this week in order to set the record straight; New Loan figures and CPI.

Investors are expecting a modest increase in new loans but are looking for CPI, on a year-over-year basis, to fall slightly to 6.1%. Should both of these figures come in as predicted, it could help to cool some worries about the Chinese economy and help boost FXI on the week. If, however, inflation increases and new loan growth continues to soar, many will grow increasingly worried over a bubble in China, causing FXI’s losses to likely accelerate on the week [also see ETF Research Report Now Available: China ETFs In Focus].

First Trust DJ Internet Index Fund (FDN

Why FDN Will Be In Focus: One of the few companies from the technology sector that is reporting this week is Google, the internet search leader and developer of the Android platform. The consensus estimate calls for earnings of about $8.73 a share but there is some speculation growing that Google may beat this mark easily, and post earnings in the $9.19 range instead. Should this happen, it could signal a rebound in tech and it would go a long way to reversing GOOG’s recent weakness in terms of share price.

Google currently takes the top spot in FDN, ensuring that any moves from the firm will have an outsized impact on the performance of FDN. Currently, GOOG makes up about 11.3% and is the only company in the 41 stock fund to have a double digit weighting. Thanks to this, as well as Google’s reputation as a leader in the space, this week’s earnings report could move FDN sharply on the week [Tech ETFs In Focus: Highlighting Some Hyper-Targeted Options].

Global X Aluminum ETF (ALUM)

Why ALUM Will Be In Focus: Once again earnings season is upon us, and that means one thing; quarterly results from the Aluminum Corporation of America, better known as Alcoa, are ready to lead things off. Expectations look to be rather high for the firm as the consensus estimate calls for EPS of 23 cents, a sharp increase from the year ago period in which the company had earnings of nine cents a share. On the revenue side, hopes are less extreme as analysts are looking for a 19.3% surge in sales when compared to the year ago period.

AA makes up nearly 10% of ALUM, enough to give the company the second biggest spot in the fund, just behind Rio Tinto. Given this high weighting, and the relative lack of other components– the fund holds just 22 companies in total– this week’s report from the company could have an outsized impact on the Global X fund going forward [see more on ALUM's Fact Sheet].

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Disclosure: No positions at time of writing.