ARGT: The Second Single-Country Frontier Market ETF

March 7, 2011 by  
Filed under Commentary, ETF IPOs (New ETFs)

U.S. investors now have easier access to Argentina, the second largest economy in South America.  Global X FTSE Argentina 20 ETF (ARGT) began trading last week (3/3/11), becoming the first fund to target the country.

The underlying FTSE index measures the performance of the top 20 companies headquartered in Argentina or which have substantial revenues or assets there.  To help ensure liquidity, only shares open to foreign ownership without restrictions are eligible for inclusion.  This includes ADRs and non-Argentinean listed securities.

The inital sector breakdown in ARGT is Energy 33.6%, Financials 21.1%, Technology 10.3%, Materials 10.0%, Telecommunications 9.8%, Consumers Staples 8.2%, and Utilities 7.0%.  Health Care, Industrials, and Consumer Discretionary have no representation.

Holdings with at least a 5% weighting include Tenaris S.A. ADS 19.6%, MercadoLibre Inc. 10.3%, Banco Marco S.A. ADS 8.7%, YPF S.A. ADS 5.1%, and Nortel Inversora S.A. ADS 5.0%.  The complete list of holdings was not available at time of publication but will eventually be at this link: 20 holdings of ARGT.

Argentina is not one of the 21 Emerging Market countries in the MSCI classification system.  Instead, it is one of the 26 countries with Frontier Market status.  ARGT becomes the second single-country frontier market ETF – the first being Market Vectors Vietnam (VNM), launched in August of 2009.

Argentina’s GDP is second only to Brazil, among South American countries, and has grown at a 6.7% annualized rate the past five years.  Export growth has been 13% annually.  Argentina is the world’s second-largest corn exporter and runs third for soy exports.

The new ETF has a 0.75% expense ratio, and the Global X website has a 1-page Argentina Profile (pdf) along with all the usual collateral information: summary page, press release (pdf), fact sheet (pdf), and prospectus (pdf).

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

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