Catering to the growing interest in emerging market investments,
First Trust
recently launched an emerging markets exchange traded fund (
ETF
) that covers large-cap companies in Brazil, India, China and South
Korea.
First Trust is offering a play for those betting that these four
countries will stand out among other emerging markets as investment
in infrastructure and growing domestic consumption drive those
economies,
writes Cinthia Murphy for IndexUniverse
. The International Monetary Fund (
IMF
) projects GDP growth in emerging economies to be almost five times
that of developed countries in 2010. [
Emerging Market ETFs: Is It Too Late?
]
The
First Trust BICK Index Fund (NASDAQ:
BICK
)
tracks the ISE BICK Index, which is made of 87 securities with a
median market capitalization of $15 billion. The fund has 100
holdings and an expense ratio of 0.70%. The index uses an equal
weighting methodology that divides each country into 25% of the
portfolio, and companies within the country allocation are equally
weighted. Each holding will represent less than 2.5% of the total
portfolio.
Sector allocations include: financials, 25%; information
technology, 22%; materials, 13%; smaller allocations are included
in industrials, telecommunications, energy and consumer
discretionary and staples. The information technology allocation is
an appealing one, considering that South Korea, India and China in
particular are fast-growing players in the area of technology
development.
It should be noted that First Trust lists Brazil's dependence on
commodities, India's liquidity issues, China's governmental
concerns and South Korea's dependence on trade as risks that result
in high volatility. Other recent news on the four countries
include:
-
Brazil
. The Brazilian government will be announcing the second phase of
its "growth acceleration program." The government has its
monetary instruments in strict control. Brazil is a leading
exporter of iron ore, steel, coffee, soybeans, sugar and beef,
and they have just uncovered large new oil beds that are expected
to increase output in the coming years. [
Brazil ETFs: A Robust Economy?
]
-
India
. India's strength comes from its huge internal consumption
levels. With such a huge population, India is better poised for
economic growth compared to other emerging markets. India is not
heavily reliant on its exports for growth. Companies tend to
thrive without threat of international competition because of
India's protectionist business nature. [
The Best ETFs for India's Booming Economy.
]
-
China
. The Chinese government also has a vested interest in building
and maintaining the country's infrastructure: when there are
roads, runways, electric power, clean water and more, social
unrest declines and productivity improves. Meanwhile, the country
still struggles with concerns over an asset bubble and is taking
steps to mitigate these issues. China's GDP soared 11.9% in the
first quarter. [
China ETF Plays.
]
-
South Korea
. South Korea, a leading manufacturer of microchips, LCD panels
and automobiles, is one of Asia's fastest-growing economies and
the country has experienced the greatest increase in per-capita
GDP since the mid-1960s. South Korea has maintained its edge by
switching gears from a developing economy based on manufacturing
into an advanced country that is increasingly based on
innovation. [
How South Korea ETF is Emerging as an Asian
Leader.
]
For more information on the emerging markets, visit our
emerging markets category
.
Max Chen contributed to this article.