Global Infrastructure ETFs for Increased EM Spending
February 7th, 2014 at 4:00pm by Max Chen
Developing economies have been stumbling, but infrastructure-related exchange traded funds could provide a more stable play on the emerging markets as countries update their basic transportation framework.
“Spending on global infrastructure depends on two things: local economic growth and government spending,” according to Morningstar analyst Robert Goldsborough. “Both dynamics can be at risk based on certain macroeconomic trends. Local economic growth, especially in emerging-markets countries, can drive infrastructure investments.”
Roger Nusbaum for TheStreet points out that that investors should consider emerging-market infrastructure funds as we look at “where the money is being spent.”
ETF investors can take a broad approach to emerging market infrastructure names through the iShares S&P Emerging Markets Infrastructure Index Fund (NYSEArca: EMIF) or PowerShares Global Emerging Markets Infrastructure Portfolio (NYSEArca: PXR).
EMIF features a 38.4% weight to transportation, 25.2% electric utilities and 12.5% power producers and energy traders, primarily following cash flow companies of infrastructure like airports, toll roads and energy transportation, which provides the ETF with a decent 3.08% 12-month yield.
PXR has large allocations to the slightly riskier industrials 50.1% and materials 46%, making it more volatile than EMIF.
The iShares EMIF ETF includes large weights to China 30.4% and Brazil 25.2% while the PowerShares PXR ETF holds a slightly lower tilt toward China at 24.3%, followed by a higher weight in Taiwan at 14.6%.
For more targeted emerging market infrastructure exposure, Emerging Global Advisors offers a couple of options, including the EGShares Brazil Infrastructure Index Fund (NYSEArca: BRXX), EGShares China Infrastructure ETF (NYSEArca: CHXX) and EGShares India Infrastructure ETF (NYSEArca: INXX).
BRXX, which recently swapped its underlying index, could provide exposure to Brazil’s increased spending ahead of hosting global events. However, the ETF has not responded to the build up ahead of the 2014 World Cup or the 2016 Summer Olympics in Brazil. [EGShares to Swap Indices on Three ETFs]
Alternatively, investors can take a more conservative play with the broader global infrastructure ETFs as developed also need to update their aging infrastructures. The e FlexShares STOXX Global Broad Infrastructure Index Fund (NYSEArca: NFRA) has 93.1% in developed market exposure, iShares Global Infrastructure ETF (NYSEArca: IGF) holds 91.7% and SPDR FTSE/Macquarie Global Infrastructure (NYSEArca: GII) includes 91.5%. [ETF Spotlight: FlexShares’ Global Infrastructure]
For more information on the infrastructure sector, visit our infrastructure category.