The United States has long had the reputation as the world’s greatest consumer, but rapid growth in emerging markets – both economically and population-wise – may soon translate into a more empowered consumer base. Global consumer ETFs are a good way to gain exposure to this shift in dynamics.
As reported in the International Business Times, Morgan Stanley’s chief economist for greater China, Qing Wang, believes China’s consumption will be equal to two-thirds of U.S. consumption by 2020 and 12% of global consumption, replacing investments and exports as the main driver of China’s economic growth.
As a result of China’s labor-intensive services industries, end of surplus labor supply and overall growth, China’s household income should steadily increase and help lift domestic consumption. Wang also adds that the high savings rate may “peak out and even start to decline through 2020″ because more government spending, redistribution of income to poorer households and an aging population will put downward pressure on savings.
The international consumer behavior research firm Trendwatching found that consumer brands in emerging markets are on a hot streak thanks to urban consumers who are becoming wealthier, more sophisticated, more mobile and more educated, writes Jon Markman for MarketWatch.
Consequently, urbanization has created an influx of confident, enthusiastic, creative, entrepreneurial pioneers who are starting their own domestic name brands that are competing quite well against foreign products.
GDP growth in emerging markets is expected to be 34% in 2010 and increase to 39% by 2015. The middle class in developing countries is around 2 billion people who could spend $6.9 trillion per year, and the number could hit $20 trillion by 2020.
According to the ETF Analyzer, there are three emerging market consumer ETFs, as well as two global consumer ETFs with which you can play this trend:
- EGShares Emerging Markets Consumer (NYSEArca: ECON)
- Global X Brazil Consumer ETF (NYSEArca: BRAQ)
- Global X China Consumer ETF (NYSEArca: CHIQ)
- iShares S&P Global Consumer Discretionary Sector Index Fund (NYSEArca: RXI)
- iShares S&P Global Consumer Staples Sector Index Fund (NYSEArca: KXI)
Max Chen contributed to this article.