Play Fantasy Trading: My iShares Dream Team

Spanish government bonds and US, Italian, Russian and Chinese equities: now show me the money

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Editor, etf.com Europe
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Reviewed by: Rachael Revesz
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Edited by: Rachael Revesz

I think I might have just picked a winning team of single country ETFs for the iShares Fund Frenzy.  Am I hopelessly naïve? Or have I made an informed decision and hoped for the best? Either way, I feel I could be on the path to claiming that £20,000 charitable prize donation.

The challenge for investors is to pick five ETFs to create a football league-style dream team. Kick-off was Monday and the first week's scores are posted on Tuesday 13th. Competitors are allowed to make two substitutes each week. Over the next month I will be enlisting the help of ETF.com analyst Spencer Bogart, to ensure that if I go down, at least someone else is going down with me.

I would describe my team choice as slightly haphazard, but at least allow me the chance to make a case for each one.


iShares S&P 500 UCITS ETF

It's a bit obvious I suppose. Despite recent worries over the government shut down and the US fiscal cliff, growth has been consistent. The index is up over 21 percent over 12 months from 31 March 2013.

Joost van Leenders, chief economist of multi asset solutions at BNP Paribas, said this week's US labour market report foretells further growth this quarter. Strong employment leads to consumption, which grew sharply in March, and corporate sales growth.

"Our main conclusion it that momentum increased strongly, setting the stage for a strong second quarter due to a positive base effect," he wrote in a research note.

I couldn't have said it better myself. Now that the polar vortex has thawed, the US economic data has a spring in its step.


iShares Spain Government Bond UCITS ETF

Spanish government bonds, I hear you say: are you crazy?

I might have been two years ago. But peripheral Europe is looking up; in fact I have to sheepishly admit it was one of the most crowded trades in April, according to a report from the Bank of America Merrill Lynch.

The yield on 10-year Spanish government bonds has fallen from over 5 percent in June 2013 to around 2.85 percent today. A similar story can be seen in Greece, Ireland and Italy.

As bond yields fall, bond prices rise. The spread over German bunds is also attractive. This is good news for my dream team and long may it continue.


iShares FTSE MIB UCITS ETF

This ETF tracks the 40 largest and most liquid Italian stocks on the Borsa Italiana. It has admittedly witnessed a rockier ride than the Spanish government bond ETF, but the road is still on the way up – it has delivered almost 29 percent over the last year.

Once a crisis-hit disaster zone, Financial Times reporters are even speculating peripheral Europe could be the next safe haven. Sounds a bit nuts. But let's try it out.


iShares China Large Cap UCITS ETF (captain of the team)

Hard landing, soft landing blah blah. Even the most informed view on China's economy might not serve the investor well when taking a punt on its stock market.

My only rationale here is the market has massively underperformed – minus 14.07 percent over the last year – and has been choppier than the North Atlantic. It could improve.

It tracks the FTSE China 25 Index, which is 25 of the largest, most liquid stocks in China.

Making China captain was a bad choice, I'll give you that. That will be one of my first changes next week.


iShares MSCI Russia ADR/GDR UCITS ETF

Without a doubt, this ETF is definitely the most risky option in the dream team.

I asked Han de Jong, chief economist at ABN Amro Bank what he thought of my hope to cash in on Russian equities over the next month, and he hesitated for a while.

"You better hope and pray Mr Putin doesn't ruin your selection," he said.

There have of course been concerns and anxiety about Russia's intervention in the Ukraine this spring, but analysts reckon the chances of a full-out war are pretty slim.

This ETF tracks supposedly liquid American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs), which are bank certificates issues for shares in an overseas company. Unfortunately for me and my chosen charity, this ETF is down 13.84 percent year to date. Fingers crossed.

Watch this space for performance results.

Which team did you pick? Let us know at [email protected]

Rachael Revesz joined etf.com in August 2013 as staff writer. Previously an investment reporter at Citywire, she has a background in writing content for retail financial advisors and has covered a wide range of subjects in finance. Revesz studied journalism at PMA Media, which has since merged with the Press Association. She also holds a B.A. in modern languages from Durham University, as well as CF1 and CF2 financial planning certificates from the CII.