A Look At A Suddenly Popular Emerging Markets ETF

May 15, 2017 9:45 am
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After spending several years in relative anonymity, the PowerShares S&P Emerging Markets Momentum Portfolio (NYSE:EEMO) is finally getting some attention. The bulk of that attention is tied to a recent trade that sent the ETF's assets under management tally soaring.

One Trade Boosts ETF Out Of The Shadows

Earlier this month, a single trade saw $268 million flow into EEMO. Prior to that, the ETF was nearly forgotten with just a couple million dollars in seed capital hanging around in the fund. Now, EEMO is home to $281.5 million in assets under management. Over the past month, the only PowerShares ETF to add more new assets than the $274.6 million added by EEMO is the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ), the Nasdaq-100 tracking ETF.

With emerging markets soaring, the sudden spurt of interest in EEMO is not altogether surprising. At least not if market observers can reconcile that some investors are looking to add momentum to trade that already has plenty of it.

Adding Momentum To A Momentum Trade

The PowerShares S&P Emerging Markets Momentum Portfolio tracks the S&P Momentum Emerging Plus LargeMidCap Index. That benchmark “is designed to measure the performance of securities in emerging markets plus Korea that exhibit persistence in their relative performance,” according to S&P Dow Jones Indices.

EEMO's geographic lineup is heavily tilted toward Asia with China, South Korea and Taiwan combining for almost 57 percent of the ETF's weight. At almost 17 percent, Brazil, Latin America's largest economy, is the only other country commanding a double-digit allocation in EEMO. Overall, there are 10 countries represented in EEMO with weights ranging from 1 percent to 23.7 percent.

EEMO's momentum emphasis is also evident at the sector level as the ETF devotes 36.6 percent of its roster to technology stocks, well above the weight afforded that sector in the MSCI Emerging Markets Index. Financial services and materials stocks combine for 38 percent of EEMO's roster.

Over the past year, EEMO's net asset value has trailed the MSCI Emerging Markets, but the PowerShares ETF is topping the emerging markets benchmark on year-to-date basis, according to issuer data.

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