Investing in the emerging markets consumer theme has previously been a tricky bet. What appears to be a fundamentally sound story has not been a guarantee of positive returns in recent years.
However, the fundamental story remains in place and exchange traded funds offering exposure to the emerging markets have been performing well as of late. Buoying the case for these ETFs going forward is the sense of optimism felt by consumers in some of the largest emerging markets.
The EGShares Emerging Markets Consumer ETF (NYSEArca: ECON), the king of emerging markets consumer ETFs, has been a solid performer among emerging markets funds this year.
SEE MORE: Emerging Markets Consumer ETF Poised for a Rally
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.
Still, some compelling data and commentary indicate it could be time for investors to revisit ETFs such as ECON. Recovering emerging economies bolster the case for ETFs such as ECON.
“In July, the International Monetary Fund forecast 4.1% GDP growth for emerging market and developing economies in 2016, with that accelerating to 4.6% in 2017. For advanced economies, growth is seen at 1.7% for both years,” reports MarketWatch.
The EGShares Emerging Markets Domestic Demand ETF (NYSEArca: EMDD), iShares MSCI Emerging Markets Consumer Discretionary ETF (NYSEArca: EMDI) and WisdomTree Emerging Markets Consumer Growth Fund (NasdaqGS: EMCG) also provide broad exposure to emerging market consumer sectors.
The Emerging Markets Internet & Ecommerce ETF (NYSEArca: EMQQ) focuses on internet names, notably those that cater toward online shopping or e-commerce.
SEE MORE: Targeted Emerging Markets ETFs
“Because the consumer ETFs are in large part a demographic play, investors are betting that their vulnerability to political uncertainty and currency risk is limited,” adds MarketWatch. “That said, emerging market consumers are vulnerable to economic downturns that could severely impinge upon spending, potentially hurting the performance of these newfound consumer ETFs.”
For more information on the developing economies, visit our emerging markets category.