India Small Cap ETFs Head-To-Head - ETF News And Commentary
02 Março 2012 - 5:17AM
Zacks
Across the board, 2011 was a very rough time for emerging
markets around the world. Political crises, inflationary concerns
and worries over exports sent a variety of markets tumbling. While
India isn’t exactly an export powerhouse, the country is a huge
market as the nation has over 1.2 billion people and an economy of
almost $4.4 trillion (PPP). Obviously, with such a high population
and a relatively low GDP, the average per capita income in the
country is still pretty low, even taking into account the solid
economic performance of India over the past decade or so. As a
result, the nation has been thoroughly rocked by high inflation
sending many securities spiraling downwards and levels of
discontent screaming higher across the country (read India ETFs:
Behind The Crash).
In fact, India has been on a campaign of more than a dozen
interest rates hikes in the past two year period in an attempt to
curtail inflation across the region. The rate increases have had
some effect has they have managed to push inflation rates down from
near 10% levels to the current mark around 7.5%. However, they have
also hurt growth and ravaged the country’s stock market, pushing
the main benchmark of India, the SENSEX, down from just under
21,000 to a low just above 15,000 to end 2011.
Despite this situation, some are beginning to hope that India
has finally gotten out of this malaise and that the economy can
resume its solid levels of growth in 2012. This is evidenced by
recent readings on the inflation front which are trending towards
two year lows as well as more stable commodity prices to start the
year. Additionally, since India is more focused on consumers
and services, the country could skirt by even if developed markets
slump, much unlike many of its peers in East and Southeast Asia
(see Five ETFs to Buy in 2012).
Thanks to these potentially improving trends, investors could
take a look at some Indian ETFs for investment, as they still could
represent a decent long-term pick at these levels. However, it
should be noted that many products targeting the region have
already surged by double digits to the start the year although they
are still depressed when looking at 52 week periods. While this is
true for all levels of Indian securities, small caps have been even
more beaten down then their large cap counterparts and could
continue to surge higher in the months ahead, beating out their
larger brethren on the upside(read Go Local With Emerging Market
Bond ETFs).
As a result of this, investors should take a closer look at the
three ETFs which track the Indian small cap market. All of these
securities offer access to pint sized securities in the nation and
while they will likely see more volatility, they could see better
returns as well should the Indian economy continue to trend in the
right direction. While any of the funds are quality picks for those
looking for exposure to the space, there are a few key details that
need to be taken into consideration before making a final
choice:
EGShares Indxx India Small Cap Fund (SCIN)
This fund tracks the Indxx India Small Cap Index which is a
free-float market cap weighted benchmark that looks to be
representative of the small cap market in India. The product
currently includes about 73 holdings while charging investors 85
basis points a year in fees. Consumer goods takes the top spot at
just over 26.3% of total assets while financials (22.3%), and
industrials (17.4%), round out the top three. Performance in 2011
saw the fund tumble by nearly 55% in the time period although it
has gained a great deal of this back in the first two months of
this year. Still, the product is trading at deep values as the PE
ratio is below 8.0 while the Price/Book is below 1.0 (read Five
Cheaper ETFs You Probably Overlooked).
Market Vectors India Small-Cap Fund (SCIF)
For another way to play the small cap space, investors have SCIF
from Van Eck. The fund tracks a benchmark of about 113 companies
while also charging investors 85 basis points a year in fees. Much
like its counterpart, consumer firms take the top spot at just over
one-fourth of the total while industrials and financials comprise
the rest of the top three spots at 18.5% and 17.3%,
respectively.
This factor along with the total number of holdings, suggests
that SCIF is less concentrated than it peers while also putting
less into financials. Much like the fund’s EG Shares counterpart,
SCIF saw a horrendous 2011, collapsing by nearly 47.4% in the
process. However, it too is still trading at extremely low
valuations—similar to SCIN—and it has begun to surge to start 2012,
adding close to 50% in the time period (read Three Overlooked
Emerging Market ETFs).
iShares MSCI India Small Cap Index Fund (SMIN)
The newest entrant in the India space comes from ETF giant
iShares and its SMIN. The fund tracks the MSCI India Small Cap
Index which holds about 90 securities in its basket while charging
investors a relatively low 74 basis points a year in fees.
Currently, its sector exposure is tilted towards financials (22%),
consumer cyclical (18%) firms, and industrials (14%), while basic
materials (13%) and health care (8%) round out the top five.
Investors should also note that individual financial firms
comprise three of the top four spots in total, further
demonstrating the focus on banking securities. In terms of
performance, it is impossible to compare SMIN to its counterparts,
as the fund debuted in early February. This means that the ETF
missed out on much of the run-up so far this year but that it also
avoided the terrible stretch of performance which was inherent to
the space in much of 2011.
Metric
|
SCIN
|
SCIF
|
SMIN
|
Expenses
|
0.85%
|
0.85%
|
0.74%
|
Total Holdings
|
73
|
113
|
88
|
Volume
|
15,100
|
53,900
|
9,000
|
Performance (YTD)
|
+41.5%
|
+49.8%
|
N/A
|
Performance (Q4 2011)
|
-23.6%
|
-26.4%
|
N/A
|
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