4 Ways to Play the Infrastructure Push
June 24th 2009 at 3:00pm by Tom Lydon
When you thought that the exchange traded fund (ETF) world couldn’t get more diversified, it surprised us all with a newly created infrastructure ETF.
The newly created iShares Emerging Market Infrastructure Index Fund (EMIF) offers investors even more exposure to emerging markets. It isn’t the first of its kind, though. PowerShares offers the Emerging Market Infrastructure Portfolio (PXR) but its composure is much different than that of EMIF in that it is broader and holds companies that do business in emerging markets, such as Ingersoll-Rand (IR), states Roger Nusbaum for TheStreet.
As for the newly created EMIF, its industry breakdown favors transportation infrastructure, which makes up 33% of the fund’s assets; electric utilities which makes up 26% of its assets; and energy equipment, which makes up 20% of its assets. Additionally, it is unique in that 9.1% of its assets are allocated to the following index funds: the iShares MSCI Malaysia (EWM), the iShares MSCI South Korea (EWY) and the iShares MSCI Chile Investable Index (ECH). The reason that EMIF holds the three aforementioned indexes has to do with the ETF creation and redemption process and the three countries don’t allow for so called in-kind transfers, a characteristic of ETFs that makes them tax-efficient.
In regards to exposure to markets, China is the largest at 33%, followed by Brazil at 14%. It also has ample exposure to Argentina at 9% and the Czech Republic at 7.5%. Of the 25 stocks held by the ETF, 10 are in Chinese companies. China is also the largest component of PXR at 20.2%, followed by Brazil at 9.3% and South Africa at 8.7%.
Both PXR and EMIF enable investors to take advantage of the affects of China’s massive stimulus package. Most Chinese ETFs are heavily concentrated on the financial sector and not infrastructure, the big recipients of Chinese investment.
For more stories on infrastructure ETFs, visit our infrastructure category.
Kevin Grewal contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.