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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About etftutor
Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at www.SmartStops.net, where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton. He is contributing author on The Street - his articles can also be found published on various sites including Yahoo! Finance, The Globe and Mail , Daily Markets, MSN Money, Seeking Alpha, Fidelity Investments, Traders Library, and Minyanville. Prior to this, Mr. Grewal was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds

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