DBEM may get a bum rap for being thinly traded and small ($22.4 million in assets under management), but less bad is the new black with emerging markets, at least for the time being. Plus, DBEM has slightly outpaced its unhedged rivals over the past year, a time in which the Chinese yuan and South Korean won have two of the strongest emerging currencies. China and South Korea combine for 37.2% of DBEM’s weight.
While those are DBEM’s largest country weights, the ETF’s Fragile Five, or BIITS, exposure should not be overlooked. Brazil, India, Indonesia, Turkey and South Africa, the BIITS/Fragile Five countries, are home to some of most downtrodden currencies in the developing world.
That is a drag on a fund such as EEM which allocates about 28% of its weight to the Fragile Five. Currency fragility in the BIITS quartet is less of a concern for DBEM not only because it is a hedged product, but also because only two BIITS nations – Brazil and India – are found among the ETF’s top-nine country weights and combine for just 17% of DBEM’s total weight. [Risks Aplenty in Indonesia]
DBEM Top Country Weights
