EM Consumer Sectors Poised for a Strong 2016

November 30, 2015 |Author: EGA Investment Strategy | Categories: Chart of the Week, Emerging Markets


EM consumer sectors poised for a strong 2016. In our recent publication Emerging Markets EPS Projected to Lead, we noted that emerging market (EM) earnings are forecast to lead other global regions, including the U.S. and Europe, Australasia, Far East (EAFE), in 2016. Part of this growth is being driven by the EM consumer.  For example, the companies in the Dow Jones Emerging Markets Consumer Titans 30 Index, the index that the EGShares Emerging Markets Consumer ETF (ECON) tracks, are projected to be up 22%, reflecting a strong 31% rebound in the cyclical discretionary sector and 12% growth in consumer staples. The sub sector drivers of growth are expected to be Travel & Leisure, Automobiles & Parts, Food & Drug Retailers, Food Producers, and General Retailers.

Fundamentals in support of consumers. EM consumer companies are poised to benefit from several macro and policy factors including:
1. Falling inflation, occuring in most EM countries, leaving more discretionary income in the pockets of the average EM consumer
2. China’s 13th five-year plan (April 2016), which will focus on an overall restructuring, shifting from a low-skilled manufacturing economy to a high-skilled manufacturing and services, consumption-based economy
3. A reduction in the minimum down payment for first time home buyers by The People’s Bank of China, the first in five years
4. Chinese authorities cutting taxes on passenger-vehicle purchases 
5. In India, key reforms proposed including a goods and service tax (GST), land and labor reforms and this week’s just announced 7th pay commission recommendations for increasing government employee salaries, should fuel sustainable economic and consumption growth
6. Telecom reforms in Mexico leading to a decline in telecom prices, which will put extra cash in the pockets of consumers

Learn more about investing in the emerging markets consumer

Emerging market investments involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, from economic or political instability in other nations or increased volatility and lower trading volume. Please call 888.800.4347 or click here to access a prospectus online. Investing involves risk, including possible loss of principal.

Index returns are for illustrative purposes only and do not represent actual fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses, which could reduce returns. Indexes are unmanaged and one cannot invest directly in an index. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance data may be higher or lower than actual data quoted. For the most current index performance data please call 888 800 4347.

The content of this presentation is presented for general information purposes only. Nothing contained herein should be considered a recommendation or advice to purchase or sell any security. While the information and statistical data contained herein are based on sources believed to be reliable, we do not represent that it is accurate and it should not be relied on as such or be the basis for an investment decision. The statements and opinions expressed are those of Columbia Management Investment Advisers, LLC and are as of the date of this presentation. All information is historical and not indicative of future results, and subject to change. This presentation may include estimates, projections and other "forward-looking statements". Due to numerous factors, actual events may differ substantially from those presented. Columbia Management Investment Advisers, LLC assumes no duty to update any such statements. Past performance does not guarantee future results.

ETF shares are bought and sold at market price (not NAV) and are not individually redeemable. Investors buy and sell shares on a secondary market. Shares may trade at a premium or discount to the NAV. Only market makers or "authorized participants" may trade directly with the Fund(s), typically in blocks of 50,000 shares.