XSP, XIN & CWO don't just hold US assets. They hold US ETFs and put a currency hedge on top of it.I currently hold XSP, XIN, and CWO in my RRSP. I plan to switch these over to VTI, VEA, and VWO to take advantage of the lower MERs. Is the savings on MERs really worthwhile if I'm wasting money once a year on currency conversion?
I'm not sold on the claim that a CAD/USD hedge is a proxy for CAD/emerging market currencies hedge either.I have found your blog very informative. Thanks.
I have a question though. Claymore have stated that :
"the USD hedge is a very strong proxy hedge to the individual currencies of the emerging countries".
I don't understand that. If the US $ drops, and the Chinese Yuan goes up, how can the hedging against the the drop of the US compensate for the rise in the Yuan. I was thinking that buying the BRIC CBQ would give me exposure to BRIC currencies. Am I totally wrong? Do you know of other ETF's that do provide unhedged exposure to BRIC currencies?
I can't comment on Korea or Hong Kong but India has a partial convertability mechanism, which allows the exchange rate to fluctuate.Then, from that presumption you conclude that emerging currencies will rise in value. Yet above I gave you a link that shows you that many emerging currencies are pegged to the US dollar (Korea, HongKong, India) and will go the same way as the USdollar.
Indeed. And since Eric has already said he doesn't understand it all makes sense. Perhaps this thread will educate him a little, perhaps all the chatter will just confuse things further. So look at the basic points and forget the arguing over which way some irrelevant currency will move.But the point is that Erik should NOT be considering the currencies of emerging countries as a similar group that moves the same way vs the dollar or Loonie. Some are stronger and others WAY weaker. To have a position "want to go long emerging currencies" is .....
In THEORY, a rapid rise in the chinese yuan would make your investments 'worth more' in canadian dollars, but the value of the company would revalue based on world supply/demand for its shares and the fundamentals of the chinese company would probably change. This is because the chinese economy would go through some turmoil if the yuan changed that much and make its exports more expensive.For instance, I believe the CBQ ETF would benefit if the Chinese Yuan is un-pegged - is this correct? I would like to have some exposure to this kind of events, just in case. And if the currencies remained pegged, there is no harm in investing a little in these countries anyway.