PIE Slices: How This Popular EM Looks for Q4

October 16th at 7:00am by Todd Shriber

When some ETFs rebalance every quarter, the changes are often modest. Perhaps a few basis points here off some big holdings and some basis points there added to some sector weights. Rebalancing for some other ETFs is a more a significant affair.

The PowerShares DWA Emerging Markets Momentum Portfolio (NYSEArca: PIE) is a perfect example. The $348.3 million PIE, which has at various points sharply outpaced larger rivals such as the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO), emphasizes country selection based on strong relative strength traits. [Best Emerging Markets ETFs]

The focus on relative strength means PIE usually makes at least one or two notable country adjustments from quarter to quarter and that was the case again at the end of the third quarter. After being dragged lower by weakness in Southeast Asia markets, PIE lowered its exposure to the Philippines and Indonesia, the region’s largest economy. [Emerging Markets ETF Hits a Rough Patch]

The fund’s allocations to China and Taiwan have increased, but despite recent strength in BRIC stocks, PIE is still underweight to those countries. [BRIC ETFs Trouncing U.S. Stocks]

“As a matter of fact, PIE remains very underweight the BRIC countries.  Between China, India, and Brazil these countries account for just 20% of the PIE compared to nearly 33% for the MSCI Emerging Markets Index,” according to Dorsey Wright & Associates.

Taiwan, Mexico, and Turkey are all overweight by more than 3% while South Africa is the largest overweight country position at 13.65%, according to Dorsey Wright.

PIE’s lack of preference for any of the BRIC nations is noticeable. The ETF features no allocation to Russia and its weight to Brazil is just 2.4% compared to almost 11.6% in the MSCI Emerging Markets Index. Despite its increased weight to China, at 15.45%, PIE’s weight to the second largest economy in the world is 315 basis points below the MSCI Emerging Markets Index.

PIE’s weight to India is just 40% that of the MSIC Emerging Markets Index.

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