Emerging Market Small Caps Are Absolutely On Fire

February 23, 2017 9:30am NYSE:DGS

emerging markets

From Zacks: For investors seeking momentum, WisdomTree Emerging Markets Small Cap Dividend ETF (DGS) is probably on radar now. The fund just hit a 52-week high and is up over 31% from its 52-week low price of $33.34/share.


But are more gains in store for this ETF? Let’s take a quick look at the fund and the near-term outlook on it to get a better idea on where it might be headed.

DGS in Focus

This product offers exposure to small-cap dividend-paying emerging market companies. Consumer Discretionary, Information Technology, Industrials, Real Estate, Financials and Materials are the top six sectors of the fund with a double-digit weight each. The fund is heavy on Taiwan (24.39%), followed by China (14.4%) and Thailand (11.5%). The fund charges 63 bps in fees (see all Broad Emerging Market ETFs here).

Why the Move?

Emerging market (EM) ETFs have had a great run lately. Though EMs used to underperform in a rising rate environment, the bloc has become a lot more insulated in recent times. To boost growth, several emerging economies have been resorting to policy easing via interest rate cuts or offering some accommodative measures.

A commodity market rebound and a growing consuming class have also helped the space and the fund lately. Plus, since DGS yields about 3%, it has become a good vehicle for earning a steady current income.

More Gains Ahead?

The fund has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. However, it still can continue with its strength given a positive weighted alpha of 28.00. A positive weighted alpha hints at more gains. As a result, there is definitely still some promise for investors who want to ride on this surging ETF.

The WisdomTree Emerging Mkts Small Cp Div Fd (NYSE:DGS) was unchanged in premarket trading Thursday. Year-to-date, DGS has gained 12.30%, versus a 5.95% rise in the benchmark S&P 500 index during the same period.

DGS currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #7 of 77 ETFs in the Emerging Markets Equities ETFs category.


This article is brought to you courtesy of Zacks Research.


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