China-heavy real estate ETF up 20% YTD
The Guggenheim Emerging Market Real Estate ETF (EMRE) is up 19.8% YTD (as of May 5). The US traded exchange traded fund tracks an index of real estate firms whose revenues derive from emerging markets (EEM) (VWO). The ETF is heavy on China, which commands 47.5% of the EMRE portfolio, seconded by Hong Kong with a 32.8% allocation.
When digging in to understand reasons for the ETF’s stellar YTD performance, one finds that the ETFs performance was largely driven by China (FXI) (YINN) real estate which gained 30.5% YTD. Within China, stocks such as Country Garden Holdings (CTRYF) (CTRYY) have returned a whopping 65.72% YTD. Others such as Agile Group Holdings (AGPYF) (AGPYY) and China Evergrande Group (EGRNY) (EGRNF) have also garnered a solid 63.7% and 56.1% return YTD.
Mexico and Taiwan follow close in infrastructure contribution this year
Mexico (EWW) and Taiwan (EWT) have also performed well with their real estate market up 17.6% and 17.2%, respectively YTD. PLA Administradora Industria, with a 39.3% return YTD has been the top performing Mexican real estate company from the EMRE portfolio, YTD. From Taiwan, the leader is Radium Life Tech Co Ltd with a 62.2% return YTD.
Valuations favor Mexico and China
From a valuation perspective, Mexican and Chinese real estate equity is relatively cheaper at 8.65 and 8.9 times price-to-earnings. Mexican real estate equity comes with an attractive dividend yield of 6.36%. Chinese real estate equity currently offers a 4.26% dividend yield.
For additional perspective we also looked at an emerging market infrastructure fund, the iShares Emerging Markets Infrastructure ETF (EMIF); infrastructure being a key contributor to real estate development.