Rate Hike Speculation and China Drag Down Retail Sector ETFs
The Strong Jobs Report for the United States was released on Friday, November 6, 2015. The report caused global markets to plummet in anticipation of a rate hike by the Fed, most likely in December. The Consumer Discretionary Sector for retail was one of the worst affected, with the SPDR S&P Retail ETF (XRT) falling 2.1% on Monday, November 9, 2015. The EGShares Emerging Market Consumer ETF (ECON) fell 2.0% that day.
As you can see in the above chart, the Global X China Consumer ETF (CHIQ) fell 2.2% due to the rate hike speculation and weak export data released over the weekend by China. The CPI (Consumer Price Index) for China for October grew by 1.3% against 1.6% growth in September. That’s another indication of slowing demand in China. ETFs with exposure to China would thus see some volatility in the near future.
The 30-day volatility of the Global X China Consumer ETF (CHIQ) is 26.7%. The WisdomTree Emerging Markets Consumer Growth ETF (EMCG) has had a volatility of 24.2%. These are on the higher side compared to US ETFs.
The Global X China Consumer ETF (CHIQ) has exposure to the Chinese retail sector with more than 60% of its assets invested in consumer cyclical stocks. The top five holdings of the ETF are Ctrip.com International (CTRP) with 5.7%, Alibaba Group (BABA) with 5.1%, Vipshop Holdings (VIPS) with 5.1%, Great Wall Motor Company with 4.9%, and JD.com (JD) with 4.8%.
The WisdomTree Emerging Market Consumer Growth ETF (EMCG) has more than 50% of its assets invested in retail sector ETFs of emerging markets. It has holdings in companies such as AMBEV (ABEV) and Alibaba Group (BABA).
In the next article, we’ll analyze the technical aspects of consumer discretionary funds around the globe.
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