Systematic Relative Strength

Each quarter, the PowerShares DWA Momentum Indexes are reconstituted. These indexes are designed to evaluate their respective investment universes (U.S Mid and Large-Cap equities, U.S. Small-Cap equities, Developed International Market equities, and Emerging Market equities) and build an index of stocks with superior relative strength characteristics. This quarter’s allocations are shown below.

PDP

DWAS

PIZ

PIE

Source: PowerShares, MSCI, and Standard & Poor’s

While capitalization-weighted indices will tend to have relatively stable sector/country allocations from one quarter to the next, our momentum indices can are designed to adapt to leadership changes. The charts below show allocations to two sectors/countries from each of our indices to give you a sense for some of the key areas of leadership and weakness.

PDP

DWAS

PIZ

PIE

The PowerShares DWA Momentum ETFs finished 2013 with $2.8 billion in assets. 2013 performance is shown below:

The performance numbers are pure price return, not inclusive of fees, dividends, or other expenses. Past performance is no guarantee of future returns. Potential for profit is accompanied by potential for loss. A list of all holdings for the trailing 12 months is available upon request.

See www.powershares.com for more information. The Dorsey Wright SmallCap Momentum Index is calculated by Dow Jones, the marketing name and a licensed trademark of CME Group Index Services LLC (“CME Indexes”). “Dow Jones Indexes” is a service mark of Dow Jones Trademark Holdings LLC (“Dow Jones”). Products based on the Dorsey Wright SmallCap Momentum IndexSM, are not sponsored, endorsed, sold or promoted by CME Indexes, Dow Jones and their respective affiliates make no representation regarding the advisability of investing in such product(s).

ETF Trends says PDP might be A Right Place, Right Time Momentum ETF:

Recent data (and the Federal Reserve’s tapering announcement) indicate the U.S. economy is improving and the current economic expansion is maturing.

Assuming that the recovery is moving into late cycle stages, investors may want to consider momentum-based strategies.

“When positioning portfolios for mid to late cycle economic activity, the momentum factor historically had a stronger track record of performance than either small cap or value in generating return,” according to PowerShares, the fourth-largest U.S. ETF sponsor. “It appears that the maturity of the economic cycle may benefit companies which are showing price strength and are able to leverage economic conditions present in a mature economic expansion.”

Past performance is no guarantee of future returns. See www.powershares.com for more information.

Tom Lydon reports on some of the economic challenges facing Indonesia:

Indonesia exchange traded funds have been among the worst performers in the emerging market category as both external and internal factors weigh on the economy, and some observers believe it could get worse next year.

The iShares MSCI Indonesia ETF (NYSEArca: EIDO) has declined 25.5% this year and Market Vectors Indonesia Index ETF (NYSEArca: IDX) is down 24.7% year-to-date.

Within Indonesia, flip-flopping public policies, corruption charges, widening disparity between the rich and poor, and surging inflation are pressuring the economy, writes Arno Maierbrugger for Investvine.

Moreover, the government implemented a protectionist policy, requiring foreign investors to reduce their stakes in mining operations within 10 years and capping foreign exposure in financial institutions.

The country’s growing current account deficit, depreciating currency and high external debt have also weighed on the market. The rupiah currency depreciated 20% since the start of 2013 and touched a 5-year low against the U.S. dollar as capital flight from Asia gained momentum on speculation of an end to easy money.

The depreciating rupiah has exacerbated losses in Indonesia investments, along with rupiah-denominated securities in the Indonesia ETFs. Foreign-currency denominated securities take a hit if their currency depreciates since the investment would be worth less when converted in to U.S. dollars.

We have also seen a large drop in exposure to Indonesia in the PowerShares DWA Emerging Markets Momentum ETF (PIE). Indonesian exposure is shown below:

PIE, which is rebalanced quarterly, went from over 15% exposure to Indonesia in Q3 2013 to 0.95% exposure in Q4 2013 and now has 0% exposure in Q1 2014.

Meanwhile, overweights for PIE are now South Africa, Taiwan, Thailand, Malaysia, Turkey, and the Philippines.

Source: PowerShares and MSCI, as of 1/1/14

A list of all holdings for the trailing 12 months is available upon request. Past performance is no guarantee of future returns. See www.powershares.com for more information.