Unheralded ETF Plays On Emerging Markets Consumers

By now it is well known that there have been two main stumbling blocks to the performance of emerging markets ETFs in 2011. First, rampant monetary tightening as a means to fight inflation, namely from, but not limited to policymakers in Beijing and Sao Paulo. Second, Europe's sovereign debt woes, Japan's natural disasters and anemic economic growth here in the U.S. have dented the primary destinations for emerging markets exports. The latter scenario may be enough to show the astute emerging markets, such as China, that a renewed focus on domestic consumption is the way to go in the future. Of course, increased domestic consumption comes at the hands of rising middle classes and newly affluent in the emerging markets. Fortunately, there are no shortage of ETFs with consumer discretionary exposure with which to play the rise of the EM consumer. Here are some of the best bets for this theme. 1) EGShares Emerging Markets Consumer Titans ETF ECON: Nearly a year old, ECON was one of the first ETFs to offer exposure to the EM consumer from a multi-country perspective and oddly enough, China is does not figure prominently in this fund's country mix. Mexico, Brazil, South Africa, India and Chile all get double-digit weights while Malaysia comes next before getting to China. A move back above $24.60 puts ECON in rally mode. 2) EGShares Consumer Services GEMS ETF VGEM: VGEM is part of the new GEMS suite of EM ETFs unveiled by EGShares last month and the ETF is noticeably different from ECON in that it offers some staples exposure through a 28.5% allocation to food retailers and wholesalers. On the discretionary side, retailers, media and travel names also figure prominently. GGEM is not as geographically diverse as ECON as Mexico, South Africa and Chile account for 61% of the new fund's country weight. 3) Global X China Consumer ETF CHIQ: The first country-specific EM consumer play, CHIQ has been around for nearly two years and the sun may start to rise for this forgotten fund if speculation that Beijing is at or nearing the end of its monetary tightening antics. If China renews its focus on domestic consumption, CHIQ is the obvious winner. Watch for a move above $18.50. 4) Global X Brazil Consumer ETF BRAQ: BRAQ has really struggled since inception and Brazil has appeared even more voracious in its monetary tightening efforts than China. Still, the purchasing power of the real cannot be diminished and outsiders seem to understate Brazil's massive tariffs on foreign goods that nearly force consumers to buy Brazilian-made goods. BRAQ may not be one to buy today, but it is worth putting on your personal watch list. 5) EGShares India Small Cap ETF SCIN and the Guggenheim China Small Cap ETF HAO: In lieu of direct consumer discretionary sector plays, the small-cap exposure offered by both SCIN and HAO acts as a fine proxy for the emerging consumer in the world's two fastest-growing major economies. Both are facing some stiff resistance right now and would be buys above $21 (SCIN) and $28 (HAO). More India: Direxion and EGShares have filed to bring India-specific consumer ETFs to market, though there is no word yet on when those funds will make their debuts.