While ECON includes many high-quality consumer brands, most of the fund’s components are domiciled in countries that are experiencing greater currency volatility, indicating the ETF has been vulnerable to the severe downturn in emerging currencies this year.
The underlying countries are heavy commodity exporters and are suffering under the currently weak commodities market. For instance, South Africa’s miner strikes have cut down its metals exports, uncertainty in Brazil has weakened the economy, and Chile’s large copper industry has been pressured by the drop in base metal prices. South Africa, Brazil and Chile combine for almost 39% of ECON’s weight, according to issuer data.
Consequently, the added exposure could hurt ECON’s returns if the emerging currencies continue to depreciate against the U.S. dollar – if the local currencies weaken against the greenback, returns are lower when converted back into U.S. dollar terms.
EGShares Emerging Markets Consumer ETF
