The emerging markets consumer has been a compelling, yet
flummoxing theme for investors -- the allure of newly affluent
(and soaring numbers of) new entrants to the middle class in the
emerging world is alluring. ETF sponsors have met that demand
with
an array of multi-country and country specific
products
.
All that said, the emerging markets consumer has not been a
guaranteed winner for investors. For example, one well-known ETF
offering exposure to the Chinese consumer is off 19.4 percent
since its debut nearly three years ago.
For investors looking to dip their toes into some emerging
markets consumer ETFs, a good news has arrived. A study by Boston
Consulting Group shows consumer spending in China and India is
expected to reach a combined $10 trillion per year by 2020,
according to Reuters
.
In the years leading up to 2020, Boston Consulting predicts
consumers in China and India will spend a combined $64 trillion,
Reuters reported. Growing middle classes in China and India,
Asia's largest and third-largest economies, respectively, are
expected to drive the consumer spending boom. Investors can
prepare for the trend with the following ETFs.
EGShares Emerging Markets Consumer ETF (NYSE:
ECON
)
The EGShares Emerging Markets Consumer ETF is arguably the gold
standard when it comes to emerging markets consumer-focused
funds. Since this is an emerging markets fund, it is bound to be
more volatile than a comparable U.S.-focused ETF. However, it
should be noted that ECON is more allocated toward staples
equities such as food, beverage and tobacco producers, not
consumer discretionary.
However, ECON only features a 10.5 allocation to India
and no exposure to China.
Global X China Consumer ETF (NYSE: )
Investors looking for Chinese exposure might consider CHIQ, one
of the more quiet ETFs with over $100 million in assets under
management (it has almost $111 million in AUM). This is the fund
referenced earlier that has lost 19 percent since inception. On
the upside, CHIQ is the
most direct route to the China consumer and the
ETF is shedding its laggard status
. As was predicted several months ago, CHIQ was poised for some
upside and the ETF has delivered, soaring almost 6% in the past
month.
The EGShares India Consumer ETF (NYSE:
INCO
)
Just as CHIQ in the world of China ETFs, INCO is an often
forgotten member of
India ETF universe
. Perhaps that will change with if Boston Consulting's forecasts
prove accurate.
INCO shares an important trait in common with ECON and that is
the ETF is much more heavily exposed to staples than
discretionary names. INCO is by no means the Consumer Staples
Select Sector SPDR (NYSE:
XLP
) in terms of being boring.
Then again, that might be a good thing and INCO might be
telling investors the Indian consumer is already perking up. On
the basis that stocks and ETFs are forward-looking assets, INCO's
41.3 percent year-to-date gain could be foreshadowing increased
strength in Indian consumer trends going forward.
First Trust ISE Chindia Index Fund (NYSE:
FNI
)
The First Trust ISE Chindia Index Fund presents a useful option
for investors on two levels. First, it eases the burden of
picking between China and India. Second, the fund is not a full
commitment to the consumer. FNI offers scant staples exposure,
but discretionary names account for almost 23 percent of the
fund's weight.
FNI's largest holding holding is not a Chinese or Indian
company. That honor goes to high-end handbag maker Michael Kors
(NYSE:
KORS
), which represents 8.7 percent of FNI's weight.
For more on emerging markets consumer ETFs, click
here
.
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