Back in the go-go days for emerging markets ETFs, small-cap
funds soared in terms of popularity, number of choices available
to investors and, yes, returns.
For example, 2010 was an excellent year for diversified,
large-cap emerging markets ETFs. That year, the Vanguard Emerging
Markets ETF (NYSE:
) and the iShares MSCI Emerging Markets ETF (NYSE:
) rose an average of 18 percent.
The SPDR S&P Emerging Markets Small-Cap ETF (NYSE:
) was even better in 2010, soaring 23.5 percent. Assuming the
current rebound for emerging markets ETFs has staying power, many
market participants are likely to keep focusing on funds like VWO
However, they would do well to remember that when developing
markets rally in earnest, small-caps usually participate in that
upside. The following ETFs indicate that may already be
Emerging Markets Small-Cap ETF Soars Above
WisdomTree Emerging Markets SmallCap Dividend Fund (NYSE:
) Along with EWX, the WisdomTree Emerging Markets SmallCap
Dividend Fund is one of the pillars of the small-cap ETF
community for developing world stocks. Like so many emerging
markets ETFs, DGS has struggled this year, but since August 26,
the fund was up three percent
entering Monday's trading session
In addition to an almost jaw-dropping 5.81 percent 30-day SEC
yield that is twice the current yield on 10-year U.S. Treasuries,
there is something else significant about DGS: Its country
allocations. Taiwan and South Korea, two of the lowest beta
emerging markets, combine for 37 percent of the of the fund's
weight. Downtrodden Thailand, Indonesia and India combine for
just 12 percent.
The recent rally for DGS has taken the ETF above its 50-day
moving average and a gain of another four percent would get the
fund above its 200-day line, which should be a bullish sign.
EGShares India Small Cap ETF (NYSE:
) It is fair to say India, the "I" in the famous BRIC acronym,
has gotten its share of negative press this year and deservedly
so. Indian equities, still not yet all that cheap relative to
historical standards, have been pummeled by a sour combination of
inflation, slowing economic growth
a weak currency and a widening account
Then there is the view, arguably an accurate one, that Indian
policymakers have largely been ineffective in their efforts to
shore up Asia's third-largest economy. All of that is to say
India ETFs have a long way to go to restore investors'
However, foreign investors have not been pulling cash from
Indian stocks at the pace that many would surmise given the
tumult in the country's equity markets. In fact, inflows to
Indian stocks this year are among the best in Asia and have been
"sticky," particularly when considering how rocky the market has
SCIN is an interesting play not just because the ETF is up
nearly 12 percent in the past week. The fund's 27.4 percent
allocation to financial services names indicates it will benefit
from government efforts to shore up the banking system.
SCIN's 12.7 weight to health care is a plus because that
sector is not heavily exposed to a weak rupee and an almost 20
percent weight to consumer stocks gives the fund some leverage
to any recovery in the Indian consumer story
Alternatives: Market Vectors India Small-Cap ETF (NYSE:
) and the iShares MSCI India Small-Cap ETF (BATS: SMIN).
For more on ETFs, click
Disclosure: Authors is long DGS.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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