ECON: Targeting Emerging Market Consumers

September 15, 2010 by  
Filed under Commentary, ETF IPOs (New ETFs), ETFs

The fifth of a planned eleven emerging markets sector ETFs from Emerging Global Advisors began trading yesterday (9/14/10).  Emerging Global Shares Dow Jones Emerging Markets Consumer Titans Index Fund (ECON) seeks to track an index measuring the stock performance of 30 leading emerging market companies in the Consumer Goods and Consumer Services Industries as defined by the Industry Classification Benchmark system.

Like other second-generation emerging market ETFs that focus on small cap stocks and individual sectors, ECON is a play on internal consumer growth.  First-generation diversified and single-country emerging market ETFs are predominately composed of large-cap companies that often derive the bulk of their revenues from manufacturing and exporting to the developed nations of the world.  Conversely, the success of ECON’s holdings will rely on the internal growth of emerging market nations and be less dependent on demand from developed markets.

The underlying index from Dow Jones consists of 30 stocks and uses a float-adjusted market capitalization methodology with individual components capped at 10%.  The largest of these holdings include Companhia de Bebidas das Americas (Brazil) 8.9%, Wal-Mart de Mexico S.A.B. 6.8%, Naspers Ltd. (South Africa) 5.7%, ITC Ltd. (India) 5.6%, and Fomento Economico Mexicano S.A.B. 5.5%.

The current country weightings are different than those typically found in cap-weighted diversified emerging market funds, with the largest weightings currently in Mexico 19.9%, India 16.6%, Brazil 16.1%, South Africa 14.0%, Malaysia 9.1%, China 8.6%, Indonesia 5.9%, and Russia 5.4%.

The top industry weightings come in at Automobiles & Parts 16.3%, Food Producers 14.8%, Beverages 14.3%, Travel & Leisure 11.9%, Media 10.9%, General Retailers 10.6%, and Food & Drug Retailers 10.4%.

The ETF will have its expenses capped at 0.85%.  The ECON overview page shows the number of holdings at 28 versus 30 for the underlying index.  Additional information is provided in the ECON fact sheet (pdf).

Other ETFs in the EGShares Dow Jones Emerging Markets Titans series currently trading are Metals & Mining (EMT), Energy (EEO), Financials (EFN), and the Composite (EEG).

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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