The emerging markets consumer theme has been one marked by
both peril and profit potential.
There is the unmistakable allure that, by some estimates,
consumer spending in just China and India will reach $10 trillion
per year by 2020. In the years leading up to 2020, the total is
expected to be $64 trillion and that is just for China and
Prepare For Chindia's Consumer Spending Surge
Then there have been the times, such May and June of this
year, when emerging markets consumer ETFs remind investors that
these are, after all, emerging markets ETFs. That means when
investors are not favoring developing world equities, consumer
funds are not immune from the ensuing shocks.
However, emerging markets ETFs have picked up the pace in
recent and investors putting cash to work with some of those
funds. Consumer ETFs are not just going along for the ride, some
are leading. Just look at the following group.
EGShares Emerging Markets Consumer ETF (NYSE:
) The EGShares Emerging Markets Consumer ETF is something of a
gold standard among emerging markets consumer funds. ECON
recently celebrated its third birthday and has over $1 billion in
assets under management. Impressively, the fund has seen positive
inflows this year, a remarkable feat given the billions in
capital investors have yanked from other emerging markets
has been in rally mode
. Since August 29, the fund has surged 12.5 percent. That
performance is made all the more impressive when considering
ECON's largest country weights do not trade at the discounted
valuations of other emerging markets.
Mexico, South Africa, Brazil and India combine for nearly
two-thirds of ECON's weight. Despite this year's emerging markets
tumble, all of those markets are still considered expensive
relative to the broader emerging markets universe. Speaking of
South Africa, ECON's largest holding is South African media firm
Naspers. Naspers happens to be one of the largest shareholders in
Tencent Holdings, the Chinese Internet giant that
has boosted several Internet ETFs this year
EGShares Emerging Markets Domestic Demand ETF (NYSE:
) The EGShares Emerging Markets Domestic Demand ETF is just over
a year old and while it also hails from EGShares, it takes a
different approach than ECON. EMDD is not limited exclusively to
discretionary stocks, though its name might imply as much.
Actually, the fund is conservatively positioned at the sector
level with staples leading the way at 29.6 percent.
Discretionary names account for 27.4 percent of EMDD's weight,
but telecom, utilities and health care combine for over 42
percent. Said another way, EMDD holds stocks of companies that
produce goods and services emerging markets consumers need to buy
with a sprinkling of discretionary names.
The thing is staples stocks almost always trade at rich
and that goes for the emerging markets versions
. EMDD's index has a trailing P/E ratio of almost 19, high
compared to other emerging markets benchmarks. To EMDD's credit,
its recent performance justifies the premium valuation.
The fund has surged 11.3 percent since August 29. India,
Mexico, China, South Africa and Brazil are EMDD's top country
exposures and combine for about 79 percent of the fund's
For more on ETFs, click
Disclosure: Author does not own any of the securities
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
Free Trading Education -
Check out the free events taking place on Marketfy
this week. Spaces are limited. Sign up today.