The scale and scope of operations of emerging markets is expanding significantly with time. They are becoming key contributors to the world economy and even outpacing many developed markets. The emerging markets are further poised for continued growth with recent exposure and opportunities.
Given the backdrop, let’s look at the best-performing emerging markets ETFs Schwab Fundamental Emerging Markets Equity ETF (FNDE), SPDR Portfolio Emerging Markets ETF (SPEM), and iShares MSCI Emerging Index Fund (EEM) to buy for global growth exposure.
In the July 2024 report by the IMF, the global growth projections remained in line with the April 2024 World Economic Outlook forecast of 3.2% in 2024 and 3.3% in 2025. Services inflation is obstructing the progress on disinflation. This is further likely to result in longer interest rates, amid escalating trade tensions and increased policy uncertainty.
In comparison to the global growth, emerging markets have performed well in the recent quarter. Factors including easing inflationary pressures, rapid nominal wage growth, low unemployment rates and social benefit payments contributed to increasing consumer spending. Emerging markets recorded solid growth in the first quarter with strong domestic demand offsetting the external economy.
They are likely to benefit from expected Federal Reserve interest rates cut in late 2024, outperform developed market equities following last fed rate hike, and result in a balanced global growth outlook with Asian emerging markets in the lead.
Given these encouraging trends, let’s look at the fundamentals of the top three Emerging Markets Equities ETFs, beginning with number 3.
ETF #3: Schwab Fundamental Emerging Markets Equity ETF (FNDE)
FNDE is an ETF that invests in the emerging markets targeting large-cap space with a distinctive approach. The fund’s selection and weighting are based on three fundamental factors: sales, cash flow, and dividends/buybacks. It seeks to track the performance of RAFI Fundamental High Liquidity Emerging Markets Index.
The fund has assets under management (AUM) of $6.13 billion. FNDE’s top holdings include Taiwan Semiconductor Manufacturing Co., Ltd. (TSM) with a 5.29% weighting, followed by Hon Hai Precision Industry Co., Ltd. at 3.99%, and China Construction Bank Corporation Class H (CICHY) and Tencent Holdings Ltd. (TCEHY) at 3.48% and 2.65%, respectively.
The ETF has a total of 376 holdings, with its top 10 assets comprising 26.60% of its AUM. FNDE’s expense ratio is 0.39%, lower than the category average of 0.50%. Over the past three months, its fund inflows were $169.51 million and $529.99 million over the past year.
FNDE pays an annual dividend of $1.25, translating to a yield of 4.23% at the current share price. Further, the fund’s dividend payouts have increased at a CAGR of 18.6% over the past three years. FNDE has paid dividends for 8 consecutive years.
FNDE has surged 8% over the past six months and 10.1% over the past year to close the last trading session at $29.51. It has a beta of 0.75. The fund has a NAV of $29.42 as of September 04, 2024.
FNDE’s POWR Ratings reflect solid prospects. The fund 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, with each factor weighted to an optimal degree.
FNDE has an A grade for Trade and Buy & Hold. Within the A-rated Emerging Markets Equities ETFs group, it is ranked #7 of the 101 ETFs.
To access all FNDE’s POWR Ratings, click here.
ETF #2: SPDR Portfolio Emerging Markets ETF (SPEM)
SPEM is a well-diversified ETF allowing long-term investors to build a balanced portfolio. The fund invests in securities and ADRs/GDRs of companies domiciled in emerging markets and provides broad exposure at a competitive price. The ETF tracks the S&P Emerging Markets BMI index.
With $9.40 billion in AUM, SPEM’s top holdings are TSM with a 7.86% weighting, TCEHY at 3.39%, and BABA and Reliance Industries Limited Shs Sponsored Global Depositary Share Repr 2Shs 144A at 1.78% and 1.43%, respectively. The ETF has a total of 3177 holdings, with its top 10 assets comprising 20.73% of its AUM.
The fund has an expense ratio of 0.07%, lower than the category average of 0.50%. SPEM fund inflows were $220.58 million over the past six months and $1.03 billion over the past year.
SPEM pays an annual dividend of $1, which translates to a 2.63% yield at the current price level. Moreover, the fund’s dividend payouts have increased at a CAGR of 4.8% over the past three years. Also, it has paid dividends for 15 consecutive years.
SPEM has gained 6.5% over the past month and 10.1% over the past year to close the last trading session at $37.94. It has a beta of 0.68. The fund’s NAV was $37.90 as of September 04, 2024.
SPEM’s sound fundamentals are reflected in its POWR Ratings. The fund has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The fund has an A grade for Trade and Buy & Hold. It also has a B grade for Peer. Of the 101 ETFs in the A-rated Emerging Markets Equities ETFs group, SPEM is ranked #5.
Click here to see all the SPEM ratings.
ETF #1: iShares MSCI Emerging Markets ETF (EEM)
EEM is a fund launched by BlackRock, Inc. and managed by BlackRock Fund Advisors. The fund invests in public equity markets of global emerging regions and stocks of companies operating across diversified sectors. The fund 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 $17.69 billion. EEM’s top holdings include TSM with an 9.53% weighting, followed by TCEHY at 4.15%, and Samsung Electronics Co., Ltd. and BABA at 3.45% and 2.05%, respectively. The ETF has a total of 4784 holdings, with its top 10 assets comprising 20.75% of its AUM.
The fund has an expense ratio of 0.70%, higher than the category average of 0.50%.
EEM pays an annual dividend of $1.04, which translates to a yield of 2.44% 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 gained 6.3% over the past month and 8.1% over the past year to close the last trading session at $42.50. And it has a beta of 0.74. The fund’s NAV was $42.53 as of September 4, 2024.
EEM’s POWR Ratings reflect its strong outlook. The ETF has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
EEM has an A grade for Buy & Hold and Trade. The fund is ranked #3 in the list of 101 ETFs in the same group.
To access all the POWR Ratings for EEM, click here.
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EEM shares were trading at $42.54 per share on Thursday afternoon, up $0.04 (+0.09%). Year-to-date, EEM has gained 6.52%, versus a 16.12% 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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