ETFs

A New ETF To Play The Emerging Market Consumer

 

In an attempt to offer investors yet another way to gain exposure to growing consumers in emerging markets, ETF provider, EGShares, launched the Emerging Markets Consumer ETF (ECON).

Data suggests that in the coming years consumers in emerging markets are going to be the true drivers of the global economy.  In fact, according to a research study conducted by McKinsey & Co., the rapidly expanding middle class of emerging nations is currently spending nearly $6.9 trillion annually and is expected to reach $20 trillion during the next decade.  Furthermore, the report indicates that income on a per-capita basis in these regions is expected to increase significantly with India expected to a near four-fold increase in average national income, with aggregate consumption to follow. 

As incomes increase in these regions, there is likely to be a shifting in spending from basic necessities to discretionary items.  In general as this shift prevails, sectors like retail, media, automotive, personal goods and travel & leisure reap the benefits.  Additionally, research indicates that local companies that are involved in the aforementioned sectors are the ones that are likely to witness the most reward. 

As a result, EGShares launched the the Emerging Markets Consumer ETF (ECON), which tracks the Dow Jones Emerging Market Consume Index, which utilizes a free-float market cap weighted index of 30 leading emerging market companies in the Consumer Goods and Consumer Services sectors.  As of June 30, 2010, the index allocated 53% of its assets to consumer goods and 47% to consumer services in addition to giving currency exposure to ten emerging markets.

In regards to country exposure, the index allocates 21.13% of its assets to Brazil, 20.81% to Mexico, 16.19% to India, 11.88% to South Africa and 8% to Chile.  Additionally, the index industry weightings are as follows: 16.27% to general retailers, 14.85% to automobiles and parts; 14.24% to beverages; 13.46% to food producers; 10.86% to media; 10.84% to food and drug retailers; 7.48% to tobacco; 7.35% to travel & leisure; 3.41% to personal goods; 1.23% to household goods.  Lastly, the index boasts Companhia de Bebidas das Americas Pref., Wal-Mart de Mexico S.A.B. de C.V. and Astra International as its top holdings. 

Disclosure: No Positions

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