Emerging Domestic Demand, Beyond BRICs ETFs Debut

August 18, 2012 /

Emerging Global Advisors unveiled Wednesday a pair of ETFs that track emerging market consumer demand and up-and-coming developing countries.

EGShares Beyond BRICs ( BBRC ) offers exposure to 50 stocks from 15 emerging markets countries: Chile, Colombia, Czech Republic, Egypt, Hungary, Indonesia, Malaysia, Morocco, Mexico, Peru, Philippines, Poland, South Africa, Thailand and Turkey.

As the name implies, it excludes Brazil, Russia, India, China (the BRICs), South Korea and Taiwan. The latter two aren’t considered emerging markets by some measures because tech companies dominate their markets. But they’re included in the MSCI Emerging Markets Index.

Beyond BRIC countries are seen as “less mature emerging markets” than the BRIC countries. The BRICs rank among the 10-largest economies in the world by gross domestic product and have become highly correlated with developed markets.

Beyond BRIC populations are projected to grow nearly 19% between 2010 and 2030 while the BRICs, South Korea and Taiwan grow nearly 13%, according to EGA citing data from the United Nations and Goldman Sachs.

BBRC most heavily weights financials at 34% of assets, telecom 19%, energy 11%, consumer staples 10%, materials 10%, consumer discretionary 8%, industrials 5% and utilities 4%.

Emerging Markets Domestic Demand ( EMDD ) tracks the INDXX Emerging Markets Domestic Demand Index, a market-cap weighted basket of 50 stocks from 11 countries traded in local currencies. EMDD includes the BRIC countries, along with Mexico, South Africa, Indonesia, Malaysia, Thailand, the Philippines and Chile.

It focuses on telecom, weighted at 30% of assets, consumer staples 28%, consumer discretionary 26%, utilities 11% and health care 5%. These are less dependent on developed market demand unlike energy, basic materials, industrials, technology and financials.

Emerging markets stand to benefit from government spending on infrastructure, totaling $19.2 trillion between 2011 and 2030, up from $7.5 trillion, the past 20 years, according to EGA. Middle-class consumers are seen increasing annual spending from $7 trillion to $20 trillion between 2010 and 2020.

BRIC nations’ economic policies are increasingly focused on supporting and sustaining local growth, while reducing dependence on exports to the developed world. Intra EM trade is expected to grow from 6% in 2000 to 38% by 2050.

These countries have more young people entering the workforce than developed countries. Their working-age population is expected to grow by 281 million people by 2020, while developed markets are seen losing 18 million. Their average annual salaries are expected to grow 175% between 2010 and 2030, while average developed market salaries are seen increasing 43% over that period.

The ETFs are rebalanced each year. Both charge 0.85% of assets a year in fees.

Direxion, the provider of triple-leveraged and inverse ETFs, is shutting down nine ETFs because of lack of investor interest. All of their names start with Direxion Daily:

1.Agribusiness Bull 3X Shares ( COWL ).
2.Agribusiness Bear 3X Shares ( COWS ).
3.Basic Materials Bear 3X Shares ( MATS ).
4.BRIC Bull 3X Shares (BRIL).
5.BRIC Bear 3X Shares (BRIS).
6.Healthcare Bear 3X Shares (SICK).
7.India Bear 3X Shares (INDZ).
8.Latin America Bear 3X Shares (LHB).
9.Retail Bear 3X Shares (RETS).

These each had $1 million to $4 million in assets and had been on the market for 14 months to 2 1/2 years. Their last day of trading is set for Sept. 5. They’ll be liquidated on Sept. 12.

 

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