Emerging markets are positioned for impressive growth in 2024, supported by higher growth rates, favorable monetary policies, attractive bond yields, and expected credit rating upgrades. As advanced economies face challenges, emerging markets shine, making these ETFs, ideal vehicles for tapping into growth in new regions, and an excellent choice for diversifying global portfolios.
Therefore, leading emerging market ETFs: iShares MSCI Emerging Markets ETF (EEM), iShares Core MSCI Emerging Markets ETF (IEMG), and Vanguard Emerging Markets Stock Index Fund (VWO), could see significant outperformance in November.
Emerging market ETFs are becoming increasingly appealing as global monetary easing and a shift away from U.S. equities create strong growth opportunities, even amidst risks like political instability and currency fluctuations. Notably, S&P Global projects real GDP growth for emerging markets (excluding China) at 3.9% in 2024 and 4.3% in 2025, underscoring the potential of these investments.
Meanwhile, the U.S. economy remains strong, bolstered by robust corporate profits. The Federal Reserve's interest rate cuts this year have further supported economic growth, fueling a stock market rally. As the Fed is expected to lower rates by 25 basis points in November, this move is likely to enhance investor confidence and positively influence emerging market ETFs.
Furthermore, investing in emerging market ETFs can add stability and growth to one’s portfolio, especially as lower interest rates drive gains in technology stocks, presenting a valuable opportunity. With these favorable trends in mind, let’s take a closer look at the fundamentals of the three highlighted emerging market ETFs.
Stock #3: iShares MSCI Emerging Markets ETF (EEM)
EEM is an exchange-traded fund launched by BlackRock, Inc. The fund is managed by BlackRock Fund Advisors. It invests in the public equity markets of emerging regions worldwide, focusing on stocks of companies across various sectors. The fund targets growth and value stocks of companies with diverse market capitalizations. It aims to track the performance of the MSCI Emerging Markets Index using a representative sampling technique.
With $18.15 billion in AUM, the fund has a total of 1,197 holdings. EEM’s top holding is Taiwan Semiconductor Manufacturing Company Limited (TSM) with a 9.52% weighting, followed by Tencent Holdings Limited (TCEHY), with a 4.20% weighting, and Alibaba Group Holding Limited (BABA) with 2.29%.
EEM has an expense ratio of 0.70%, higher than the category average of 0.51%. It currently has a NAV of $44.76. Its fund outflows came in at $1.53 billion over the past three months.
The fund’s annual dividend of $1.04 yields 2.32% on the current share price. Its four-year average yield is 2.20%. Its dividend payouts have increased at a CAGR of 11% over the past three years and 3% over the past five years.
EEM has gained 17.4% over the past nine months and 18% over the past year to close the last trading session at $45.38.
EEM’s strong outlook is reflected in its POWR Ratings. The ETF has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
It has an A grade for Buy & Hold and Trade. Of the 101 ETFs in the A-rated Emerging Markets Equities ETFs group, it is ranked #3. To access all the POWR Ratings for EEM, click here.
Stock #2: iShares Core MSCI Emerging Markets ETF (IEMG)
IEMG is an exchange-traded fund launched by BlackRock, Inc., and managed by BlackRock Fund Advisors. The fund invests in the public equity markets of global emerging regions, targeting stocks of companies across diversified sectors. It includes growth and value stocks of companies across various market capitalizations. The fund seeks to track the performance of the MSCI Emerging Markets Investable Market Index using a representative sampling technique.
With $82.80 billion in assets under management (AUM), IEMG’s top holding is TSM with an 8.28% weighting, followed by TCEHY, with a 3.66% weighting, and BABA, with 2.17%. IEMG has a total of 2,816 holdings.
IEMG has an expense ratio of 0.09%, lower than the category average of 0.51%. It currently has a NAV of $55.94. Its fund inflows came in at $1.48 billion over the past year.
The ETF pays an annual dividend of $1.49, which yields 2.66% on the current price. IEMG has a four-year average dividend yield of 2.72%. Its dividend payouts have increased at a CAGR of 7.6% over the past three years and 1.9% over the past five years.
IEMG has gained 17.8% over the past year and 16.3% over the past nine months to close the last trading session at $56.69.
IEMG’s POWR Ratings reflect its promising prospects. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system.
IEMG has an A grade for Buy & Hold, and Trade and a B for Peer. In the Emerging Markets Equities ETFs, it is ranked #2. Click here to access all of IEMG’s POWR Ratings.
Stock #1: Vanguard Emerging Markets Stock Index Fund (VWO)
VWO is an exchange-traded fund launched and managed by The Vanguard Group, Inc. It invests in the public equity markets of global emerging regions. It invests in stocks of companies operating across diversified sectors. It invests in growth and value stocks of companies across diversified market capitalizations. The fund seeks to track the performance of the FTSE Emerging Markets All Cap China A Inclusion Index by using a representative sampling technique.
With $83.04 billion in assets under management (AUM), VWO’s top holding is TSM with a 7.73% weighting, followed by TCEHY, with a 3.68% weighting, and BABA, with 2.41%. It has a total of 4,853 holdings.
It has an expense ratio of 0.08%, lower than the category average of 0.51%. It currently has a NAV of $46.71. Moreover, over the past three months, VWO’s fund inflows came in at $965.09 million.
The fund’s annual dividend of $1.21 yields 2.59% on the current share price. Its four-year average yield is 3.01%. VWO’s dividend payouts have increased at a CAGR of 2.5% over the past three years and 1.2% over the past five years.
VWO has gained 20.2% over the past year and 19.8% over the past nine months to close the last trading session at $47.48.
VWO’s POWR Ratings reflect this promising outlook. The VWO’s overall A rating equates to a Strong Buy in our proprietary rating system.
VWO has an A grade for Buy & Hold and Trade and a B for Peer. It is ranked first in the Emerging Markets Equities ETFs group. Click here to access all of VWO’s POWR Ratings.
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VWO shares were trading at $47.42 per share on Tuesday afternoon, up $0.69 (+1.48%). Year-to-date, VWO has gained 16.27%, versus a 22.32% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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