I found this little nugget on Index Universe about a new index from STOXX to eventually become an investible product called Dow Jones STOXX EU Enlarged Select Dividend 15 Index. The index has just 15 stocks and it captures high yielders from countries that were part of the Eurozone expansion.
The countries represented are Poland, Czech Republic, Romania, Slovenia, Malta and Hungary. Financials are the largest sector by far followed by consumer, energy, industrials, materials and telecom.
According to Index Universe the yield of the index is 4.85. The article points out a couple of potential flaws and it is clear that the current version of the index is narrower than most other indexes you will see.
According to the PDF linked to above the index is priced in several currencies including the US dollar which paves the way for a US based product.
It will be a while, if ever, for this to become an ETF but STOXX didn't create the index for its health. It would open the way to European frontier markets in a transparent manner. I have written a fair bit about frontier markets and I think they have a small place in a diversified portfolio. I think 2% is probably about right for people for whom they are appropriate (to be clear this segment is not for everyone, just some folks).
If this ever becomes an ETF and it is well received it will open the door for other frontier market products.
A big theme that I have been harping on since the start of this site is ETF innovation. A product that invests in frontier markets whether it is this index or something else a few years now will be a big step toward new access.
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5 comments:
Roger,
This morning, reading your post, I was thinking about ETFs and a long term question came to mind.
The trend for more "normal" shareholders to have these vehicles instead of specific securities may reduce shareholder activisim and knowledge. This, in turn, may increase the power of institutional funds, private equity and executive management to manage the company for their short term gains.
Pressure for excellent corporate governance, transparency, and accountability may be diminished. (Which I think studies about the influence of technical and "day-trading" will also show.)
The bond between each company and their shareholders is reduced and that can't be good. Financial education could also suffer as people no longer struggle to read the annual reports of each of their holdings.
I am not saying that ETFs aren't wonderful in many ways, but I don't see this aspect as good for individual investors long term.
Any comments?
no argument on the general theme. but these 15 companies seem rather expensive, at a pe of 16 and 2.7 book. and look at the run up they've had in the last four years.
maybe not the best timing.
WITY, fair point but wouldn't that description apply to a lot of emerging and frontier?
This will be a long time b4 there is any product to buy.
I don't really think Cramer thought it through - he recommended CH on one of his shows last year.
I used RNE and CEE for a while, trying to get at Eastern Europe. Searched around and all I could find for Estonia was a private fund run by Soros, where you had to put in a gazillion dollars to particpate. I'd love to find something for Hungary about now.
I heard some people buy the Austrian index which lists a lot of companies in Eastern Europe. OldVet
I guess Croatia doesn't rate with Malta.
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