Infrastructure ETF yielded over 10% YTD
The iShares Emerging Markets Infrastructure ETF (EMIF) is up 10.9% YTD (as of May 5). The fund currently has over $47 million in assets under management and invests in an index composed of 30 of the largest emerging market equities (EEM) (VWO) in the infrastructure industry, the S&P Emerging Markets Infrastructure Index. The ETF is heavy on Brazil (EWZ), Hong Kong, and China (FXI) (YINN), which command 23.8%, 20.56%, and 13.5% respectively, of the EMIF portfolio.
Top emerging market performers: Mexico, Chile & China
Deeper insight into the ETF’s YTD performance indicated that the ETFs performance was largely driven by Mexico (EWW) infrastructure equity which returned 32.3% YTD. The three ADRs of the company Grupo Aeroportuario gave the required boost to the portfolio’s performance. Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (OMAB), Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (PAC), and Grupo Aeroportuario del Sureste, S. A. B. de C. V. (ASR) have returned 30.3%, 27.6%, and 38.2%, respectively YTD.
Chile (ECH) infrastructure equity gained 24.2% YTD. Chile’s Enel Americas SA (ENIA) was the sole contributor to the return. Hong Kong and China infrastructure equity stand next, with a 13.2% and 12.6% return respectively, YTD. From China, Beijing Capital International Airport (BJCHF) (BJCHY) has risen 38.5%, while Zhejiang Expressway (ZHEXY) has returned 29.2% YTD.
Investing in infrastructure could be expensive
From a valuation perspective, infrastructure equity across the best-performing markets is currently very expensive. Mexico maintains a 27.2 price to earnings (P/E) multiple, while Chile, Hong Kong, and China are trading at a 26.8, 15.6, and 33.0 P/E respectively. Among these, Chinese infrastructure equity offers the highest dividend yield of 3.7%.
From our analysis of these two ETFs, we see China and Mexico as major contributors to the surge in emerging market real estate indices. We also see Mexico and Chile contributing most substantially to the rise in emerging market infrastructure equity. We’ll reveal more perspective on each of these markets as we move ahead in this series.