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Emerging Markets Maturing Despite Volatility


The EGShares Emerging Markets Consumer ETF (ECON) , the oldest exchange traded fund focusing on the emerging markets consumer, celebrated its fifth anniversary Monday. More importantly, ECON can celebrate more success than traditional emerging markets ETFs in 2015, to this point a rough year for developing world equities.

Year-to-date, ECON is down 7.9% while the Vanguard FTSE Emerging Markets ETF (VWO) , the largest emerging markets ETF by assets, is lower by 10.4%.

Emerging markets investing, including doing so with ETFs, is changing, presenting investors with opportunities to take more tactical, thematic approaches to tap into the rise of developing world consumers. With many traditional emerging markets ETFs either too concentrated in the BRIC nations, excessively exposed to state-run enterprises or both, investors should rethink how they access emerging markets consumer trends. [India Consumer ETF]

The ETF’s “consistent performance has contributed to ECON earning a five-star Overall Morningstar Rating™ among 561 Diversified Emerging Market ETFs and open-end funds as of September 30, 2015 based on risk-adjusted returns,” according to a statement from EGShares.

ECON’s underlying countries are heavy commodity exporters and are suffering under the currently weak commodities market. For instance, South Africa’s miner strikes have cut down its metals exports, uncertainty in Brazil has weakened the economy, and Chile’s large copper industry has been pressured by the drop in base metal prices. South Africa, Brazil and Chile combine for over 38% of ECON’s weight, according to issuer data.

Although the slump afflicting some of the largest emerging markets ETFs (and some of the mid-tier country funds as well) has not shown any signs of abating, that does not mean opportunity among developing world equities is dead.

Developing economies can still generate above-average returns as a growing middle class demands a higher standard of living. For instance, the rise in discretionary spending should help boost car sales. [Opportunities In Emerging Markets]

“According to the World Bank, the emerging market middle class is expected to increase from 4 percent of global population in 2000 to 15 percent in 2030. With that, the OECD estimates that global spending is projected to grow from $21 trillion in 2009, to $35 trillion by 2020, and $56 trillion by 2030,” notes EGShares in the statement.

EGShares Emerging Markets Consumer ETF


The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.