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EM Infrastructure ETFs: A Familiar Theme Worth Revisiting

May 31, 2011 3:50 PM ETBRXX, INXX, CHXX, PXR, EMIF1 Comment
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By Jason Raznick

One of the more prevalent themes over the past couple of years regarding investing in emerging markets has been infrastructure On the surface, this theme has been almost too simple for its own good. Because they are “emerging,” countries such as the BRIC quartet and others simply don't have the same quality of roads, bridges, pipes, etc. that are found in the West.

In other words, infrastructure in the emerging world is starting from such a low base, that should be pretty easy to make money on this theme, right? Maybe, maybe not. An EM infrastructure ETF is no different than any other infrastructure ETF or stock. There are simply no guarantees here.

That said, Bank of America Merrill Lynch was out with a report last week that may have gone unnoticed because most of us were looking ahead to the long weekend. Bottom line in the report: The bank expects select emerging markets to spend $6 trillion on infrastructure projects over the next three years. Yep, that's trillion with a “T.”

Water, transportation and energy investments will consume the bulk of these funds, accounting for 82% of total projected spending, Frank Holmes noted, citing the report.

With that, let's look at some of the ETFs that could benefit from increased EM infrastructure spending.

1) Pick A BIC There is no Russia-specific infrastructure ETF, but the folks at Emerging Global offer the Emerging Global Brazil Infrastructure ETF (NYSE: BRXX), the Emerging Global India Infrastructure ETF (NYSE: INXX
) and the Emerging Global China Infrastructure ETF (NYSE: CHXX).

Each ETF merits attention for its own unique reasons. As been noted plenty of times in the past year or so, Brazil will need to bolster infrastructure for the 2014 World Cup and 2016 Summer Olympics. INXX is compelling because India's infrastructure is among the worst in the world and the country has almost no choice but to make improvements on this front. As for CHXX, China has shown a penchant for heavy infrastructure spending just in the name of job creation and that could be a catalyst for the ETF going forward.

2) PowerShares Emerging Markets Infrastructure Portfolio (NYSE: PXR): China, Brazil and South Africa account for over 30% of this ETF's weight and the U.S. chimes at almost 9.5%, giving PXR a balanced approach to the global infrastructure theme. PXR spent much of May in a tailspin, but looks to be correcting an oversold condition as we speak. The ETF holds 75 stocks and has almost $236 million in assets under management.

3) iShares MSCI Emerging Markets Infrastructure Index Fund (Nasdaq: EMIF): If you really can't decide between China and Brazil, EMIF looks like a sound bet as those two countries company for over 58% of the ETF's weight. EMIF is also one of just a handful of ETFs that offers any noteworthy exposure to the Czech Republic (6.33%). With over $147 million in assets under management, EMIF is one of the dominant ETFs in the EM infrastructure genre

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