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Why Are Emerging Market Consumer ETFs on a Rise?

Mark Jonker

Should You Rebalance Retail Exposure to Emerging Market ETFs?

Performance analysis

On November 03, 2015, the consumer discretionary ETFs rose around the globe, with the SPDR S&P Retail ETF (XRT) rising by 1.2%. On the other hand, the highlights of the day were the emerging market ETFs, as the EGA Emerging Global Shares Trust (ECON) climbed by 1.4% at the market close, and the Global X Brazil Consumer ETF (BRAQ) rose the highest, with a 6.5% gain. Consumer staple ETFs in the United States saw a drop with the Consumer Staples Select Sector SPDR ETF (XLP) and the PowerShares DWA Consumer Staples ETF (PSL) falling by 0.5% and 0.4%, respectively.

 A closer look

As can be seen from the chart above, the consumer discretionary subsector outperformed the consumer staples, but as a whole, a major thing to note here is the rising investments in the consumer sector of emerging markets like Brazil and China.

Brazil has been a major commodity-driven economy, while China’s manufacturing sector has always been considered a safe investment by some. The emerging markets saw their consumer sector ETFs rise on the backdrop of consumer spending’s projected to rise in emerging markets. While the economies have been showing signs of slowing down, investors now have become skeptical about their favorite investments.

Technical analysis of emerging market ETFs

The Global X Brazil Consumer ETF (BRAQ) has been trading above its 20-day moving average of $8.6, whereas the 100-day moving average was above the closing price of November 03, 2015. The ETF’s topmost holdings are BRF SA (BRFS), Souza Cruz SA (CRUZ3), and Raia Drogasil (RAIDF).

The EGA Emerging Global Shares Trust (ECON) shows a strong positive trend when we look at its moving averages. It has been trading above its 20-day and 100-day moving averages. The volatility also has been on a lower side when compared with the BRAQ ETF. The topmost holdings of this ETF are Naspers (NPN), Ambev (ABEV), and Ctrip.com (CTRP).

In the next article, we’ll have a look at the how the fund flows have been stacking up in consumer ETFs lately.

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