Emerging markets are poised for significant growth in 2024 and in the coming years, thanks to their growing global contribution and expanding infrastructure. Also, favorable monetary policies, the adoption of the latest technologies, and changing worldwide dynamics should result in more opportunities.
Given the backdrop, investors can consider leading emerging markets ETFs iShares MSCI Emerging Index Fund (EEM), iShares Core MSCI Emerging Markets ETF (IEMG), and Vanguard FTSE Emerging Markets ETF (VWO) for diversified global exposure.
According to the IMF’s recent world economic outlook, global growth is expected to remain stable and decent. The real GDP growth is anticipated to be 3.2% in 2024 and will likely follow the same trend in 2025. While advanced economies are projected to grow at 1.8%, emerging markets and developing economies will likely outpace the market and grow at 4.2% in both years.
Emerging markets and economies are surpassing the developed economies with their growing contribution at the global scale as they continue to expand rapidly with increasing infrastructure development requirements, growing domestic consumption, and wider scope for technological advancements. Technologies like artificial intelligence (AI) have accelerated the pace of growth for companies.
Also, the recent interest rate cuts by the Fed are likely to attract capital inflows and ease borrowing, resulting in increased economic activities. Further, fading inflation concerns have helped economies reach closer to their inflation targets. This could possibly lead to further favorable monetary policies and favor emerging markets.
These trends will propel demand for companies across different sectors operating in emerging economies, offering significant long-term growth potential. This makes emerging market ETFs an ideal investment choice for investors looking for high-potential returns and diversification.
Considering these conducive trends, let’s look at the fundamentals of the top three Emerging Markets Equities ETFs, starting with number 3.
ETF #3: iShares MSCI Emerging Index Fund (EEM)
EEM is a fund launched by BlackRock, Inc. and managed by BlackRock Fund Advisors. The fund offers exposure to stock markets of emerging economies and targets stocks of companies operating across diversified sectors. It seeks to track the performance of the MSCI Emerging Markets Index by using a representative sampling technique.
The fund has assets under management (AUM) of $17.48 billion. Its top holdings comprise Taiwan Semiconductor Manufacturing Co., Ltd. (TSM) with a 9.46% weight, followed by Tencent Holdings Ltd. (TCEHY) at 4.22%, Samsung Electronics Co., Ltd. at 2.40%, and Alibaba Group Holding Limited (BABA) at 2.21%.
The ETF has a total of 1202 holdings, with its top 10 assets comprising 26.29% of its AUM. It has an expense ratio of 0.70%, higher than the category average of 0.51%. Also, the fund has a beta of 0.74.
The fund’s annual dividend of $1.04 yields 2.39% on the current share price. Also, EEM’s dividend payouts have increased at a CAGR of 11% over the past three years and 3% over the past five years. The fund has paid its dividends for 17 consecutive years.
EEM has surged 3.1% over the past six months and 10.8% over the past year to close the last trading session at $43.52. The fund’s NAV was $43.72 as of December 3, 2024.
EEM’s POWR Ratings reflect its solid prospects. The fund has an overall rating of B, translating 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 Trade and Buy & Hold. Within the Emerging Markets Equities ETFs group, it is ranked #16 of the 101 ETFs.
To access all EEM’s POWR Ratings, click here.
ETF #2: iShares Core MSCI Emerging Markets ETF (IEMG)
Launched by BlackRock, Inc. and managed by BlackRock Fund Advisors, IEMG offers outstanding coverage of emerging markets. It invests in stocks of companies across diversified sectors and offers comprehensive exposure by including smaller firms in the portfolio. IEMG tracks the MSCI emerging markets investable market index.
With $80.34 billion in AUM, IEMG’s top holdings are TSM with a 7.92% weighting, TCEHY at 3.53%, and Samsung Electronics Co., Ltd. and BABA at 2.01% and 1.86%, respectively. The ETF has a total of 2774 holdings, with its top 10 assets comprising 24.27% of its AUM.
The fund has an expense ratio of 0.09%, lower than the category average of 0.51%. IEMG fund inflows were $809.96 million over the past three months and $2 billion over the past year.
IEMG pays an annual dividend of $1.49, which translates to a 2.73% yield at the current price level. Moreover, the fund’s dividend payouts have increased at a CAGR of 7.6% over the past three years. IEMG has paid dividends for 11 consecutive years.
IEMG has gained 2.7% over the past six months and 10.5% over the past year to close the last trading session at $54.57. In addition, it has climbed 7.9% year-to-date. It has a beta of 0.75. The fund’s NAV was $54.75 as of December 3, 2024.
IEMG’s sound fundamentals are reflected in its POWR Ratings. 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 and Buy & Hold. Of the 101 ETFs in the Emerging Markets Equities ETFs group, IEMG is ranked #15.
Click here to see all the IEMG ratings.
ETF #1: Vanguard FTSE Emerging Markets ETF (VWO)
VWO is an ETF launched and managed by The Vanguard Group, Inc. The fund targets public equity markets in emerging markets worldwide like China, Brazil, Taiwan, and South Africa. It focuses on stocks of companies operating across diversified sectors. VWO tracks the FTSE Custom Emerging Markets All Cap China A Inclusion Net Tax Index.
The fund has an AUM of $81 billion. Its top holdings include TSM with an 8.40% weighting, followed by TCEHY at a 3.60% weighting, BABA at 2.32%, and Meituan Class B at 1.49%. VWO has a total of 4843 holdings, with the top 10 assets comprising 23.99% of its AUM.
The fund’s expense ratio is 0.08%, compared to the category average of 0.51%. Over the past month, VWO fund inflows came in at $8.05 million, and $1.07 billion over the past three months. Also, it has a beta of 0.69.
VWO has paid dividends for 16 consecutive years. The ETF pays a $1.21 per share dividend annually, which translates to a 2.64% yield on the current price. Its dividend payments have grown at a CAGR of 2.5% over the past three years and 1.2% over the past five years.
VWO has gained 5.7% over the past six months and 13.7% over the past year to close the last trading session at $45.99. The fund has a NAV of $46.10 as of December 3, 2024.
VWO’s POWR Ratings reflect its strong outlook. The ETF has an overall rating of B, which translates to a Buy in our proprietary rating system.
VWO has a B grade for Buy & Hold, Peer, and Trade. The fund is ranked #14 in the list of 101 ETFs in the same group.
To access all the POWR Ratings for VWO, click here.
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VWO shares were trading at $46.08 per share on Wednesday afternoon, up $0.09 (+0.20%). Year-to-date, VWO has gained 12.98%, versus a 28.73% 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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