I am retired and take educated guesses on all things financial.

February 13, 2009

February 13, 2009: Emerging Markets Infrastructure May Emerge

With real gloom and doom hanging over many of the world economies, governments are poised to throw funds into projects that may revitalize growth. One way that is popular is make-work jobs within infrastructure. Although one can rightfully contest the value and immediacy of infrastructure ventures to stimulate out of a recession, infrastructure itself will be a large, ongoing gift that keeps giving to investors well beyond the current malaise into the post-recession period.

An interesting way to invest in the sector is through PowerShares' Emerging Markets Infrastructure Portfolio ETF (PXR). Launched in the fall of 2008, PXR is trading around $22.00, $3.00 less than its opening price, which is not bad considering the market from then until now.Although the expense ratio is rich for an ETF,0.75%,the portfolio of sixty-one holdings appears to bode well for short term portfolio asset parking and may well provide significant long term capital growth.

Included in the portfolio are industries that include, but not limited to as per the Prospectus, construction and engineering, construction machinery, diversified metals and mining, factory electrical equipment, industrial machinery and steel.

Top country allocation are as follows:

China 16.7%
Indonesia 10.11%
South Africa 8.58%
United States 8.35%
Brazil 7.54%
Malaysia 6.47%
France 5.71%
Russia 5.21%
Taiwan 4.60%
Mexico 4.21%

Market cap and style allocation are:

Large-cap growth 39.84%
Large-cap value 15.51%
Mid-cap growth 17.70%
Mid-cap value 15.53%
Small-cap growth 3.91%
Small-cap value 2.27%
other 5.22%

The largest company holdings include:

ABB Ltd.
United Tractor
China Communications Construction Co. Ltd.
Carso Infrastructure Construction S.A. de C.V.
Compania Vale do Rio Doce
Indocement Tunggal Prakarsa
Jiangxi Copper Co. Ltd.
Aveng Ltd.
Gamuda Bhd

Although this ETF has a small asset base (around $9m), PXR may be an interesting addition as the investor looks beyond the financial show trials, our domestic political stimulus legislation and the doom and gloom media to construct a solid portfolio highlighting sectors that are not likely to melt away, regardless of the perils ahead.

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