Within the entire emerging market universe, the top performer
last quarter was a relatively obscure name, giving investors
exposure to foreign stocks they can't get into anywhere else -- and
it's now getting liquid enough to give active traders a chance to
strut their stuff.
[caption id="attachment_54634" align="alignright" width="300"
caption="Phiroze Jeejeebhoy Towers, which house the Bombay Stock
Exchange"]
[/caption]
The India Small-Cap Index ETF (
SCIF
,
quote
) led everything else in the emerging equity category last quarter,
up just over 41% year to date.
Unlike many international ETFs that simply
wrap a basket
of thinly traded stocks around one or two core holdings that U.S.
traders can buy or sell separately, SCIF is almost entirely
invested in India-only stocks.
The exceptions, Rediff.com (
REDF
,
quote
) and Mahanagar Nigam (
MTNOY
,
quote
), barely account for more than 2% of the portfolio, so U.S.
traders are essentially getting unique ETF-only exposure here.
And since large-cap India ETFs like
INDY
(
quote
) or traditional closed-end mutual funds like
IFN
(
quote
) focus on the biggest names in Bombay, overlap between funds is
nonexistent as well.
INDY bottoms out at companies worth around $6 billion. SCIF tops
out at $1 billion, so we truly are in two different worlds.
Because these stocks are traded only in India, they represent
the domestic market a lot better -- not to mention the local
consumer economy.
Instead of
national banks
and global IT companies, sector weighting is geared toward
consumers, small lenders and manufacturers. These are companies
that make things and provide services that well over 1 billion
Indian consumers need and use, so they are much more insulated from
global economic trends.
Likewise, traders in SCIF have less to worry about from fickle
global speculators inflating the NAV only to let go at the first
moment of weakness.
As sponsor Van Eck points out, the Indian middle class will
encompass 600 million people in the next 15 years, at which point
these companies will be serving a core market double the size of
the United States.
Large-cap India stocks have frustrated many traders over the
last few years, and while SCIF contains some losers like
ailing airline Kingfisher
, it has a lot of winners in its court as well.
For a taste of this key BRIC economy that is actually growing
fast, SCIF may still have long-term upside left to run.
At the moment, the technical situation here also looks
interesting. SCIF is only 2% below both 50- and 200-day resistance
and nearly 14% below its YTD peak around $14 a share.
Even a little move should turn those resistance lines into
support if it's convincing enough. And at that point, we're close
enough to a "golden cross" that momentum could start guiding price
on its own.
