Holdings: EEG holds companies domiciled in emerging markets; some of the top companies in the fund include Russian natural gas company Gazprom, Brazilian energy company Petroleo Brasileiro, Latin American wireless provider America Movil and Bank of China.

Objective: EEG seeks to track the Dow Jones Emerging Markets Titans Composite Index, which is an index composed of a representative sample of 100 emerging market companies deemed by Dow Jones to be leaders in each of 10 sectors.

Things to Know

• Brazil is the top country, with 24.9% of the weighting. China has 24.3%, Russia has 13.4% and India has 13%. Other countries include Mexico, South Africa, Chile and Indonesia.
• Oil and gas is the top sector, weighted at 30.8%; financial is 22.1%; telecommunications is 11.6%; and basic materials is 9.3%.
• The expense ratio is 0.75%.
• EEG is a relative newcomer on the ETF scene – the fund launched on July 22.

The Latest News

• Emerging Global Advisors CEO Bob Holderith feels that interest in emerging markets should continue to expand. “It’s a 25-year growth story in its sixth year.” The positive growth outlook for emerging markets goes hand-in-hand with the changing demographic picture in these countries.
• Holderith notes that in most of these countries, there’s a huge young population, all looking for the “Western experience”: cell phones, iPods, dining out and more. (More on Emerging Global Advisors).
• Although the pace may eventually slow down, Barron’s reports that emerging markets still have room left to grow in the long haul. And for the time being, they may be the place to hide out as developed markets still work toward normalcy.
• Emerging markets already account for one-third of the global GDP and 10% of the world’s market capitalization.

According to the National Treasury forecast, South Africa’s economy is expected to grow 1.5% next year as consumer spending and investment increase and infrastructure projects get under way, report Nasreen Seria and Mike Cohen for Bloomberg. Growth will likely average 2.5% over the coming years. For 2009, the economy is projected to contract 1.9%. (Reasons to keep an eye on South Africa).

Other areas forecast to grow next year include:

• The recent recession has pushed the country’s deficit to 7.6% of GDP in the year through March, but the Treasury expects it to ease in the coming years. The Treasury estimated that consumer spending will expand 0.9% in 2010 after contracting 3.1% this year.

• The government is pessimistic about growth forecasts, citing lower global demand for South African goods in the near term. Exports are forecast to grow 3.8% in 2010 after contracting 19.8% this year, while imports are projected to expand 4.2% following a 20.3% drop in 2009.

On the downside, South Africa still faces challenges:

• South Africa is struggling with an AIDS Pandemic, massive poverty and unrest because of public service cutbacks, comments Danny Schechter for The Market Oracle.

• The country has lost 500,000 jobs, tax revenue has diminished but expenditures are still high.

Schechter sees that the financial crisis stemming from the United States should be examined to ensure that South Africa won’t be caught in the same situation again. He suggests the country needs to turn more inward to attain a self-sufficiency in order to shield the economy against external forces. (How regulations helped  South Africa).

For more information on South Africa, visit our South Africa category.

• iShares MSCI South Africa Index Fund (NYSEArca: EZA): up 43.6% year-to-date

Max Chen contributed to this article.

The Economist states that cell phones have a different role in developing countries than they do in industrialized nations. Cell phones are giving many of the world’s poor their first exposure to telecommunications. In the developed world, cell phones generally are just extensions to existing land lines.

What has the expansion of cell phones in emerging markets meant for the industry and these countries?

• A recent study showed that adding 10 cell phones per 100 people in a typical developing country will boost GDP growth by 0.8% per person.
• The spread of mobile phones in developing countries has been accompanied by the rise of home-grown mobile operators in China, India, Africa and the Middle East. These providers rival the providers in the West. (What’s next for global telecom?)
• The emergence of China’s two leading telecom equipment-makers, Huawei and ZTE, have entered the global stage in the past five years and now have a growing reputation for quality and innovation, prompting a shakeout among the incumbent Western equipment-makers (How to play China’s telecom boost ).
• The development of new phone-based services, beyond voice calls and basic text messages, are now becoming feasible.. The services tend to center around agricultural advice, health care and money transfer – things that could deliver enormous benefits to residents of poor nations.

For more stories on the telecommunications industry, visit our telecommunications category.

• iShares S&P Global Telecommunications (NYSEArca: IXP): up 6.9% year-to-date

• SPDR S&P International Telecom (NYSE: IST) is up 11% year-to-date

Kevin Grewal contributed to this article.

Over the next three-to-nine months, frontier markets are anticipated to outperform the emerging and developed markets, reports Allen Wan for Bloomberg. The Middle East is in a position to lead the way, since the region has not yet recovered from the global market meltdown, making valuations cheap. The region’s equities are expected to catch up as corporate earnings improve. (Read about five risks to the Middle East economy).

A frontier market is generally a country that is fairly poor. An example is most of Africa. (Four reasons Africa is appealing).

The markets are usually locked up with little or no liquidity, but they can be a good diversification tool for investors. They can be long-term uncorrelated investments and they have enormous potential for growth. There are currently 28 countries listed as frontier markets, reports IS for Intelligent Speculator. (Read about MSCI’s latest review of these markets).

For more stories about frontier markets, visit our frontier market category.

• Claymore/BNY Mellon Frontier Markets (NYSEArca: FRN): up 57.2% year-to-date

• PowerShares MENA Frontier Markets (NYSEArca: PMNA): up 24% year-to-date

• Market Vectors Gulf States (NYSEArca: MES): up 24.9% year-to-date

• WisdomTree Middle East Dividend (NYSEArca: GULF): up 17.4% year-to-date

• SPDR S&P Emerging Middle East & Africa (NYSEArca: GAF): up 49.8% year-to-date

• Market Vectors Africa (NYSEArca: AFK): up 43.5% year-to-date

South Africa was not overwhelmed by the financial crisis because of investments that adhered to the country’s high level of self-regulation as well as its limited exposure to experimental or risky asset-backed securities, according to etfexpress.

Ian Hamilton, chief executive of hedge fund administrator Investment Data Service Group, claims that other factors supported the country, as well:

• The banking system did was not exposed to sub-prime mortgages and other poor investment products
• Hedge funds did not have a lot of foreign investors that could have withdrew money in a crisis
• Hedge funds were not highly leveraged

A majority of investors in South Africa rely on institutional investments, especially pension funds, and on long-term investment strategies that use portfolio diversification. The ability to deliver returns while keeping risk at a minimum has raised the South Africa hedge fund industry’s profile in the domestic and foreign markets.

A rising level of investor interest may cause some problems in the future, though: The industry will have to maintain a level of managers with the right amount of talent. Managers will also need to diversify their client base to obviate the potential exodus of cornerstone investors. The industry could also face a medium-term growth trend that will not be as bedazzling as previous years.

• iShares MSCI South Africa Index (NYSEArca: EZA): up 51.8% year-to-date

For more information on South Africa, visit our South Africa category.

As per the prospectus, the funds will target six Chinese industries: consumers, financials, energy, industrials, materials and technology. What’s unique about these funds is that they will enable investors to specifically invest in specific Chinese sectors, as opposed to choosing a broader emerging market or China ETF that’s heavily invested in a range of sectors.

Luisa Beltran for Inites notes that 80% of the assets will be invested in an underlying index, while another 20% will go to futures, swaps and options.

Global X also filed for a line of single-country ETFs that will be passively managed and enable investors to grab exposure to emerging markets that can be difficult to access.  These markets include Denmark, Africa, Finland, Norway, Pakistan, Poland and the United Arab Emirates.

Global X was founded in March 2008, and they currently have 12 ETFs in registration with the SEC. Another seven are “effective,” which means that they are cleared for launch. Right now, the firm has two available ETFs that launched this year:

• Global X/InterBolsa FTSE Columbia 20 (NYSEArca: GXG): up 80.1% since Feb. 9 inception
• Global X FTSE Nordic 30 (NYSEArca: GXF): up 10.7% since Aug. 19 inception

For more stories on new ETFs, visit our new ETF category.

Kevin Grewal contributed to this article.

Frontier markets are not stable enough to be named “emerging,” but these markets do have more potential to deliver higher returns to compensate for the greater risk, remarks Will McClatchy ETFZone. Frontier markets are defined as suffering from extreme volatility, poor trading, corruption, dismal accounting and a tendency to expropriate foreign capital.

What’s so appealing about frontier investments? First, the fastest-growing countries are currently the ones that are “economically delayed.” Second, risk in frontier markets is greatly reduced when added in small amounts to a portfolio.

Some frontier market regions to consider include:

• Africa is a prime example of a frontier market. During the financial debacle, Africa did not suffer as much from the credit crunch since it was lightly leveraged. The continent also has a great amount of natural resources.
• States of the Persian Gulf and Middle East hare developing into emerging status. The oil-rich states are raking in the benefits of increasing wealth, transparency and infrastructure development.
• Eastern Europe, former Soviet satellite states and Asian countries do have some ready supply of natural resources, but some regions are corrupt and home to organized crime.
• Smaller Latin American countries like Bolivia, Ecuador and Peru are sometimes categorized as “frontier.” However, most Latin American ETFs are more weighted toward advanced economies, and single-country ETFs don’t cover all the nations.

A few of the frontier market ETFs out there include:

• Claymore/BNY Mellon Frontier Markets ETF (NYSEArca: FRN): up 42.7% year-to-date; expense ratio is 0.65%; country samplings include: Egypt, Colombia, Kazakhstan, Chile and Poland

• Market Vectors Gulf States ETF (NYSEArca: MES): up 18.2% year-to-date; expense ratio is 0.98%

• SPDR S&P Emerging Europe (NYSEArca: GUR): up 58.3% year-to-date; expense ratio is 0.6%; note that GUR has a high allocation to Russia

• Market Vectors Africa ETF (NYSEArca: AFK): up 32.2% year-to-date; expense ratio is 0.83%; country samplings include: South Africa, Nigeria, Morocco and Egypt

Fore more information on frontier markets, visit our frontier markets category.

Max Chen contributed to this article.

The reason Africa is becoming an interesting area for investment, writes Aaron Levitt for Investopedia, is because the continent has a medley of beneficial factors:

• The region has experienced an average 6% growth since 2004
• Africa contains almost 40% of the earth’s total gold reserves and 30% of mineral deposits are in the continent’s ground
• African nations have favorable global trade pacts, which help fund African infrastructure and telecommunications
• Most importantly, countries in the region are becoming more politically stable
  

An interested person may consider investing in the region through ETFs, but there is a caveat. Since Africa is an emerging market that’s still going through a big growth phase, volatility is a risk factor to keep in mind.

South Africa is the largest economy on the continent and it often has a higher weighting in regional ETFs as well as its own ETF:

• iShares MSCI South Africa (NYSEArca: EZA): up 44.6% year-to-date

• WisdomTree Dreyfus South African Rand (NYSEArca: SZR): up 30.2% year-to-date

• SPDR S&P Emerging Middle East & Africa (NYSEArca: GAF): up 40% year-to-date

• Market Vectors Africa (NYSEArca: AFK): up 33.9% year-to-date

For more information on Africa, visit our Africa category.

Max Chen contributed to this article.

The major demographic transition that Africa is following is that as families move up in status in developed areas of Africa, they are having fewer children. This is a trend seen in developed areas of the world – as countries become richer and more developed, they have fewer children per family, explains The Economist.

An emergent African middle class is taking out mortgages and moving into newly built flats, and two children is what they want. Restraining population growth is also seen in developing Asian countries and Latin America.

Will the “familiar” Africa become the “old” Africa?: a place of large families and high fertility, a continent in which societies are under extreme stress and where the young massively outnumber the old, environmentally degraded, ravaged by poverty, hunger, HIV/AIDS and civil war?

If the “demographic dividend” kicks in and the “new” Africa continues to develop, the societies may grow wealthier, they may move from high fertility to low, and their working age population will dominate. A successful cycle of growth will kick in but only if Africa chooses the right policies and takes initiative to solve their current problems.

Demography will decide if the next generation succeeds and changes the course for the future.

• iShares MSCI South Africa (EZA): up 38.3% year-to-date

• SPDR S&P Emerging Middle East & Africa (GAF): up 34.9% year-to-date

• Market Vectors Africa (AFK): up 31.1% year-to-date

For more stories about Africa, visit our Africa category.

South Africa’s GDP has contracted an annualized 3% from the from the first quarter, while growth dropped 6.4%, which officially made this the country’s first recession in 17 years, writes Robb M. Stewart for The Wall Street Journal.

President Jacob Zuma vowed to create 500,000 jobs this year and fight poverty. This statement comes after mining companies and manufacturers cut thousands of jobs and spending. In July, jobless rates inched up to 23.6% in the second quarter as 267,000 became unemployed and 302,000 gave up on looking for work.

Consumer price inflation dropped to 6.7% from 6.9% last month, but still remains above the Central Bank’s target range, reports Robb M. Stewart for The Wall Street Journal. The Reserve Bank reduced its repurchase rate 0.50%, to 7% earlier this month and has a target inflation rate of 3% to 6%.

According to iStockAnalyst, South Africa will eventually pull through to become “one of the big five emerging markets.” Why?

• South Africa has a stable political climate and financial sector
• The government is putting $98 billion in infrastructure
• Increases in the country’s product-based economy
• The country remains a big transport center for the majority of the world’s oil
• South Africa is one of the last to be affected by the global downturn, which means a recovery is only beginning

• iShares MSCI South Africa Index (EZA): up 39.8% year-to-date

For more information on South Africa, visit our South Africa category.

Max Chen contributed to this article.