New State Street ETF Tracks Emerging Market Smallcaps

By Heather Bell

Last Friday, State Street Global Advisors rolled out the U.S. market's first capitalization-weighted, small-cap emerging markets exchange-traded fund. The SPDR S&P Emerging Markets Small Cap ETF (EWX) tracks the S&P/Citigroup Emerging Market Small Cap Index.

WisdomTree (WSDT.PK) manages the WisdomTree Emerging Markets SmallCap Dividend Fund (DGS), but it is dividend-weighted. It also only covers 14 countries-EWX covers 25. However, while EWX charges an expense ratio of 0.65%, DGS is slightly cheaper, at 0.63%.

The new SPDR fund's underlying index has roughly 1,660 holdings as of March 31. The index's top five holdings include Indonesia's Bakrie & Brothers (0.81%), Taiwan's HannStar Display Corp. (0.49%), Nigeria's Ecobank Transnational (0.48%), Egypt's Egypt Kuwait Holding Co. SAE (0.47%), and China's Chaoda Modern Agriculture Holdings Ltd. (0.40%).

Taiwan has by far the largest weighting among the 25 countries at 31.91%, while China is weighted at 7.83%, India at 6.51%, South Africa at 6.48% and Brazil at 5.97%. Notably, Taiwan is also the largest country in DGS.

Emerging markets have been correlating more closely with developed markets; however, it is more pronounced among large-cap stocks. For investors seeking added diversification, small-cap emerging market stocks can hold a great deal of appeal.

You can read the prospectus for EWX here.

• More on choosing the right ETF

Comments

[Tim Plaehn:]

Being cap weighted kind of negates the exposure to small cap stocks doesn't it. You will get very little exposure to the smallest cap stocks in the index, which could be the most explosive.

2008 May 20 09:04 AM