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Checking The Pulse Of The Emerging Markets Consumer

ETF Professor

When emerging markets stocks and exchange-traded funds were really ripping higher several years ago, market observers would frequently cite the consumer as the next bastion of growth in developing economies.

That prompted enthusiasm for ETFs such as the Columbia Emerging Markets Consumer ETF (NYSE: ECON). Previously known as the EGShares Emerging Markets Consumer ETF (and still listed on Google Finance as "EGA Emerging Global Shares Trust"), ECON is one of the largest and most seasoned options among emerging markets consumer ETFs. The ETF tracks the Dow Jones Emerging Markets Consumer Titans 30 Index.

That index just turned 7, underscoring the point that index and ETF providers have been delivering access to consumer trends in developing economies for a while.

Emerging Market Environment

“The emerging market consumer is not a new theme and since the inception of the Dow Jones Emerging Markets Consumer Titans 30 Index (1/8/2010), these companies have outperformed broader EM indices. Over three year rolling return periods (rolled monthly), the Dow Jones Emerging Markets Consumer Titans 30 Index has consistently outperformed both the MSCI EM Index and the S&P Emerging BMI Index under almost all market conditions,” according to S&P Dow Jones Indices.

Delving Deeper Into ECON

ECON, which rose 5 percent last year, allocates 22.5 percent of its weight to South Africa, Africa's second-largest economy behind Nigeria. China is the ETF's second-largest geographic exposure at 21.1 percent. The other BRIC economies, Brazil, Russia and India, combine for about 28 percent of ECON's weight.

In total, the ETF offers exposure to 11 countries. Three are Latin American economies and four are Southeast Asian economies, including that region's largest, Indonesia.

“There is no denying demographics – emerging market populations will continue to grow rapidly and the emerging market consumers will continue to increase their wealth. However, broad emerging market benchmarks do not target this exposure [emphasis omitted], as the consumer sectors make up less than 20 percent of those benchmarks,” according to S&P Dow Jones Indices.

Consumer discretionary stocks are 54.1 percent of ECON's weight while consumer staples names represent 43.2 percent. By comparison, discretionary and staples stocks combine for just over 17 percent of the MSCI Emerging Markets Index.

The average market value of the 30 stock's in ECON's underlying index is nearly $29 billion.

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