Emerging market ETFs are currently creating strong growth opportunities for investors owing to their strong growth, expanding consumer base, and widening role in the global economy. Amid this, investing in emerging market ETFs could be ideal for investors as these ETFs offer exposure to a wider and more diverse region.
Against this backdrop, let’s delve into the best-performing emerging markets ETFs iShares MSCI Emerging Markets ETF (EEM), iShares Core MSCI Emerging Markets ETF (IEMG), and Vanguard FTSE Emerging Markets ETF (VWO), with a high potential for returns and instant diversification.
The role of emerging markets is continuously evolving and expanding with strong domestic demand, robust global economic growth, and a growing consumer base. Also, trends like boosting the electronics industry, easing oil prices, and steadily easing monetary policy are further poising these markets for future gains.
According to a forecast, real GDP growth for EMs like Brazil, China, India, and Indonesia is expected to boast at 2.8%, 4.6%, 6.8%, and 5.0% for the current year. S&P Global Ratings economists also expect most emerging economies to grow faster in 2025.
The International Monetary Fund (IMF) projects global economic growth of 3.2% in both 2024 and 2025, where advanced economies are set to grow at a modest pace of 1.8%. Notably, emerging markets and developing economies are projected to outpace the advanced economies with a 4.2% growth rate.
Amid this, emerging market ETFs emerge as an appealing investment choice for investors. These ETFs offer stability, global diversification, and great long-term growth prospects. Further, against the market's current dynamics, holding stakes in emerging markets is a better choice.
With that in mind, let’s look at the fundamentals of the top three Emerging Markets Equities ETFs, beginning with number 3.
ETF #3: iShares MSCI Emerging Markets ETF (EEM)
EEM is a fund launched by BlackRock, Inc. and is managed by BlackRock Fund Advisors. The fund invests in public equity markets of emerging regions and stocks of companies operating across diversified sectors. The fund seeks to track the performance of the MSCI Emerging Markets Index using a representative sampling technique.
The fund has assets under management (AUM) of $17.57 billion. The fund’s top holdings consist of Taiwan Semiconductor Manufacturing Co., Ltd. (TSM) with a 9.94% weighting, followed by Tencent Holdings Ltd. (TCEHY) at 4.29%, and Alibaba Group Holding Limited (BABA) and Samsung Electronics Co., Ltd. at 2.18% and 2.15%, respectively.
The ETF has a total of 1195 holdings, with its top 10 assets comprising 26.14% of its AUM. EEM’s expense ratio is 0.70%, above the category average of 0.51%.
EEM’s annual dividend of $1.04 translates to a yield of 2.40% at the current share price. The fund’s dividend payouts have increased at a CAGR of 11% over the past three years. EEM has paid its dividends for 17 consecutive years.
EEM has surged marginally over the past six months and 9.5% over the past year to close the last trading session at $43.28. The fund has a beta of 0.74. And its NAV stood at $43.36 as of November 22, 2024.
EEM’s POWR Ratings reflect its solid prospects. The fund has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
EEM has a B grade for Buy & Hold. Within the Emerging Markets Equities ETFs group, it is ranked #13 of the 101 ETFs.
To access other EEM’s POWR Ratings for Peer and Trade, click here.
ETF #2: iShares Core MSCI Emerging Markets ETF (IEMG)
IEMG is an ETF launched by BlackRock, Inc. and managed by BlackRock Fund Advisors. The fund offers outstanding coverage of emerging markets, targeting stocks of companies across diversified sectors. IEMG tracks a market-cap-weighted index of emerging-market firms, covering 99% of market capitalization. It tracks the performance of the MSCI Emerging Markets Investable Market Index.
The fund has an AUM of $80.08 billion. Its top holdings include TSM at an 8.32% weighting, followed by TCEHY at a 3.59% weighting, and BABA and Samsung Electronics Co., Ltd. at 1.83% and 1.80%, respectively. IEMG has a total of 2809 holdings, with the top 10 assets comprising 24.46% of its AUM.
The fund has an expense ratio of 0.09%, lower than the category average of 0.51%. Over the past three months, IEMG fund inflows came in at $809.96 million, and $2 billion over the past year. Also, it has a beta of 0.75.
IEMG pays an annual dividend of $1.49, which translates to a 2.74% yield at the current price level. Also, the fund’s dividend payouts have increased at 7.6% CAGR over the past three years and 1.9% over the past five years. Also, IEMG has paid dividends for 11 consecutive years.
IEMG has gained 7.2% year-to-date and 9.4% over the past year to close the last trading session at $54.21. The fund has a NAV of $54.25 as of November 22, 2024.
IEMG’s POWR Ratings reflect a strong outlook. The ETF has an overall rating of B, translating to a Buy in our proprietary rating system.
IEMG has a B grade for Buy & Hold. The fund is ranked #12 in the list of 101 ETFs in the same group.
To access all the POWR Ratings of IEMG, click here.
ETF #1: Vanguard FTSE Emerging Markets ETF (VWO)
VWO is launched and managed by The Vanguard Group, Inc. The fund invests in public equity markets of emerging global regions like China, Brazil, Taiwan, and South Africa. It targets growth and value stocks of companies through diversified market capitalizations. The fund tracks the performance of the FTSE Emerging Markets All Cap China A Inclusion Index by using a representative sampling technique.
With $80.84 billion in AUM, VWO’s top holdings consist of TSM with a 7.73% weighting, TCEHY at 3.68%, and BABA and Meituan Class B at 2.41% and 1.28%, respectively. The ETF has a total of 4853 holdings, with its top 10 assets comprising 24.01% of its AUM.
The fund has an expense ratio of 0.08%, compared to the category average of 0.51%. VWO fund inflows were $8.21 million over the past month and $1.44 billion over the past three months.
VWO pays an annual dividend of $1.21, equating to a 2.66% yield at the current price level. Its dividend payouts have increased at a CAGR of 2.5% over the past three years. VWO has paid its dividends for 16 consecutive years.
VWO has gained 2.3% over the past six months and 12.2% over the past year to close the last trading session at $45.41. In addition, it has climbed 10.5% year-to-date. It has a beta of 0.69. The fund’s NAV was $45.45 as of November 22, 2024.
VWO’s POWR Ratings reflect its sound fundamentals. The fund has an overall rating of B, which translates to a Buy in our proprietary rating system.
The fund has a B grade for Trade, Peer, and Buy & Hold. Of the 101 ETFs in the Emerging Markets Equities ETFs segment, VWO is ranked #11.
Click here to see all the VWO ratings.
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VWO shares were trading at $45.60 per share on Monday morning, up $0.19 (+0.42%). Year-to-date, VWO has gained 11.81%, versus a 27.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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