CNN Money video interview
with Mark Mobius, Ph.D. and executive chairman of Templeton
Emerging Markets Group, shed some light on a few issues concerning
emerging markets investors.
[caption id="attachment_63888" align="alignright" width="300"
caption="Men wait for work in Myanmar"]
One topic he discussed was China; specifically China's current
status -- whether it is going to experience a hard or soft landing.
According to Mobius China will not land at all. He expects it to
continue to grow, citing the large size of its economy and the vast
numbers of people who are moving up the economic scale. Yes, there
indeed is a slowdown, and there are still obstacles to growth, like
complete transparency from the government and Chinese companies,
but Mobius is undeterred and optimistic.
Another comment from Mobius was his fondness for Myanmar as a
great investment opportunity. This backs up investment titan Jim
Rogers' view of Myanmar as possibly the
greatest growth opportunity in the world
today. It is a great challenge to invest there, but it is something
to keep an eye on and get invested in whenever and however you
In addition to his optimism about certain regions of the
emerging markets world, Mobius is also optimistic regarding
particular sectors. Citing five billion consumers worldwide, Mobius
is investing in the consumer sector. For emerging markets ETF
investors there are a few different choices, but none of these
shares trade very often, so exercise extreme caution. However, if
like Mobius you want specific access to emerging market consumer
companies, these ETFs may be worth a look.
In the consumer discretionary category we have two options: the
iShares MSCI Emerging Markets Consumer Discretionary Index (
) and EGShares Consumer Services GEMS Exchange Traded Fund (
). VGEM is the more liquid but still averages less than 2,000
shares per day. EMDI averages less than 500, which apparently takes
it off the radar screen for some; I was unable to chart the ETF
with the company from which I normally get my charts. But for VGEM
we can see the ETF is tracking
), the emerging market index ETF. Given that it is tracking the
index so closely there seems little benefit in buying such a low
There are also two ETFs in the emerging market consumer staples
sector: The Dow Jones Emerging Markets Consumer Titans Index Fund (
) and EGShares Consumer Goods GEMS Exchange Traded Fund (
). Here we have better liquidity. GGEM averages less than 3,000
shares per day but ECON is averaging about 132,000 per day. Those
holding ECON will have a good chance of selling whenever they
choose. However, like consumer discretionary, the ETFs don't really
distinguish themselves from EEM, with a very high correlation for
Finally, Mobius also has a positive outlook for the oil sector.
There is currently just one ETF focusing on emerging market energy
companies: the EGShares Energy GEMS ETF (
). Again we have a sector ETF closely tracking the index, in
this case EEM. OGEM is also fairly illiquid, averaging less than
2,500 shares per day.
We will likely continue to see very high correlations between
emerging market sector and index ETFs for the foreseeable future.
Current uncertainty is causing many asset classes and sub-asset
classes to trade in tandem, with barely any differentiation between
sectors that are performing better or worse than each other. Novice
investors should stay with the broad-based emerging markets ETFs.
For more sophisticated investors, benefiting from Mobius' chosen
sectors will require the selection of individual stocks within
those sectors to make any perceivable difference in your portfolio