Trouble Ahead For Copper ETFs? [Global X Copper Miners ETF, Freeport-McMoRan Copper & Gold Inc.]

Global X Copper Miners ETF (NYSEARCA:COPX)

This ETF represents an equity option for copper investors, tracking the Solactive Global Copper Miners Index. This benchmark holds 25 stocks in its basket, while it charges investors 65 basis points a year in fees for the exposure.

Investors should note that the fund has a definite skew towards smaller securities as large caps account for just one-third of the total. Meanwhile, American firms make up just 5% of assets, leaving a third for Canada, 14% for Australia, and 11% for the UK.

COPX tumbled by about 3.2% on Friday trading, slumping along with its underlying metal (see all the Materials ETFs here).

First Trust ISE Global Copper Index Fund (NASDAQ:CU)

This copper mining ETF follows the ISE Global Copper Index for exposure, tracking 25 companies across the globe. The fund uses an equal weight methodology, giving roughly the same weights to each security in the portfolio, while it charges investors 70 basis points a year in fees for the exposure.

Large caps make up roughly 40% of assets in this fund, followed by about one-third in mid cap stocks. U.S. copper miners make up just 7% of assets, while Canada (32%) and the UK (20%) dominate from a country look.

This ETF fell about 3.5% in Friday trading, a relatively big loss compared to the S&P 500’s flat performance for the session.

Bottom Line

It doesn’t really seem to matter how the economy is doing in the U.S. for copper, as the jobs report was decent, while the recent manufacturing data has been solid. Instead, copper is trading off of Chinese news and the outlook for the economy in that nation.

And unfortunately for copper investors, that outlook doesn’t appear to be very robust as growth expectations are falling, and concerns over debt are building. A turnaround will definitely be needed here before gains can come back to copper, so until then, it may be best to stay on the sidelines instead of jumping into any of the aforementioned copper-focused ETFs.

This article is brought to you courtesy of Eric Dutram.

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