What are the best emerging market ETFs? 10 Emerging Markets ETFs to Watch

Contents

Intro

What are emerging market ETFs? 

Why invest in emerging market ETFs?

10 Emerging Markets ETFs to Watch

Vanguard FTSE Emerging Markets ETF (VWO)

iShares Core MSCI Emerging Markets ETF (IEMG)

Schwab Emerging Markets Equity ETF (SCHE)

iShares MSCI Brazil ETF (EWZ)

iShares MSCI China ETF (MCHI)

iShares MSCI India ETF (INDA)

ProShares Ultra MSCI Brazil Capped (UBR)

KraneShares CICC China Consumer Leaders Index ETF (KBUY)

WisdomTree India Earnings Fund (EPI)

First Trust Chindia ETF (FNI)

 

 

Intro 

Investing in emerging market ETFs is a sure way to receive handsome returns. This is because such ETFs are liquid and offer exceptional diversification. So, which emerging market ETFs should you consider in 2021? Let’s find out!

What are emerging market ETFs?

Emerging market ETFs are ETFs (exchange-traded funds) of emerging markets such as Asia, Latin America, and Eastern Europe countries. Most emerging market ETFs are managed passively and house equities from a wide array of countries.

The best part about investing in these ETFs is that they offer high returns. However, the same is true when it comes to risks due to the volatility of emerging markets. Investors invest in them since they offer exceptional growth opportunities as companies grow.

Emerging market ETFs are primarily found in countries that are rich in natural resources, have a high growth rate, and most of their products end up in developed countries. This is the case with countries such as Brazil, India, China, and others.

Why invest in emerging market ETFs?

· Diversification: most investors are attracted to these ETFs since they offer unmatched diversification. An investor can seamlessly invest in health, mining, tech, and other industries without many handles.

· Exceptional returns: another chief benefit of emerging market ETFs is their high returns. You’ll find value in every dollar you invest in.

· Liquidity: they are touted to be liquid compared to emerging market mutual funds allowing you to trade at any time of day.

10 Emerging Markets ETFs to Watch

Vanguard FTSE Emerging Markets ETF (VWO)

VWO is touted as the largest ETF in the emerging markets segment. It boasts of an asset net worth of more than $50 billion. Its investment portfolio spans over 5,000 stocks from companies around the globe. However, 40% of these stocks are from China-based companies. This is a good fit if you are looking for one of the most liquid ETFs in the world.

It has an annual expense of a mere 0.1% making it one of the cheapest ETFs for both established and novice traders. After switching from the FTSE index in 2015, the ETF has since penetrated the Chinese, Brazilian, and Indian markets which are regarded as emerging economies.

iShares Core MSCI Emerging Markets ETF (IEMG)

Another outstanding ETF in this sphere is the IEMG. It boasts of $50 billion in asset value. It has a smaller investment portfolio with at least 2,500 stocks. While it focuses on China, it boasts of a diversified geographical distribution. It also has less allocation when it comes to financials compared to VWO.

At least 15% of its assets are from Alibaba Group, Taiwan Semiconductor Manufacturing, and Tencent Holdings. It uses the MSCI index which indicates South Korea as an emerging market. It uses a Republic of Mauritius-based subsidiary to invest in the Indian market. Other markets include South Africa, Hong Kong, Russian Federation, and Saudi Arabia, among others.

 

Schwab Emerging Markets Equity ETF (SCHE)

While it is smaller compared to VWO and IEMG, it has an asset value of $6 billion. The ETF focuses on financials and China with at least 1,500 stocks under its management. Unlike the two ETFs, it doesn’t invest in small companies rather established companies and business entities. You’d think that it has a smaller market value but interestingly, its $35 billion is larger compared to Vanguard.

SCHE tracks the FTSE Emerging index that is composed of mid-and large-cap companies that are found in emerging markets such as India and Brazil. It doesn’t identify South Korea as an emerging market but rather invests more in Chinese and Indian companies.  

iShares MSCI Brazil ETF (EWZ)

Another common practice in investing in emerging market ETFs is to focus on an individual market. In this case, Brazil. This ETF manages more than $5 billion in assets and trades more than 30 million shares in a day. It consists of stocks of smaller companies that you can buy and sell daily. The expense ratio is capped at 0.59% making it a cheaper option.

EWZ is based on the Brazilian firm index and has an MSCI ESG Fund Rating of 3.78 making it a secure ETF to trade. Some of the industries it invests in are energy, financials, basic materials, industrials, utilities, and healthcare.

iShares MSCI China ETF (MCHI)

After the Brazilian fund, comes the China-focused emerging market ETF. It boasts of $5 billion in assets and trades up to 3.9 million shares daily. The majority of the 600 stocks are from Mainland China companies. Others are from neighboring countries. With an expense ratio of 0.59%, it offers an opportunity for both entry-level and established traders.

The MCHI exposes you to a wide array of Chinese shares. Most of these shares are from financials and tech companies based in China. It is also an ideal investment since it is highly liquid trading millions of shares every day. Besides, it is one of the cheapest options in the market.

iShares MSCI India ETF (INDA)

This is yet another country-specific ETF focusing on the Indian market. India is touted as one of the fastest-growing economies and it boasts of a population of more than 1.3 billion people. These attributes of the market make investing in Indian ETFs lucrative since it indicates high liquidity. INDA commands an asset management portfolio of $3 billion with at least 6 million shares traded every day.

It falls under the Indian index that consists of 85% of some of the largest companies. Since its inception in 2012, it has attracted numerous assets and is hailed for exceptional index tracking. You can find investment in energy, technology, healthcare, utilities, telecommunications services, and more.  

ProShares Ultra MSCI Brazil Capped (UBR)

The UBR emerging market ETF is another option for investors looking to invest in the Brazilian market. It has a net asset worth of $4.77 million and averages 3.4 million in shares traded daily. The ETF has an expense ratio of 0.95% making it one of the best beginner-friendly options to trade. Here, you’ll find mid and large-cap Brazilian companies. Unfortunately, it has poor liquidity hence not an ideal option for daily traders. It tracks the MSCI Brazil 25/50 index further inhibiting its success since the index requires modification of the RIC-compliant portfolio.

KraneShares CICC China Consumer Leaders Index ETF (KBUY)

The KBUY tracks a Chinese index of companies that deal with consumer-related products. These companies are from different industries such as healthcare, electronics, clothing, household appliances, and more.

Most companies in this ETF are well-established and have a track record of paying dividends. Top holdings include Muyuan Foods Co., Yum China Holdings, Inc., and Gree Electric Appliances, Inc. among others.

 

WisdomTree India Earnings Fund (EPI)

EPI is one of the best emerging market ETFs from India. It presents you with numerous Indian equities that you can invest in. each equity is weighed by earnings rather than market capitalization. So, if you are looking to overweight such equities, then is the ETF you should invest in.

The downside: it charges a hefty fee and its holding costs are higher compared to other ETFs. While it has a large trading volume, it faces structural challenges that most ETFs in emerging markets have to do with. Notable holdings include ICICI Bank Limited, NTPC Limited, Infosys Limited, and Tata Consultancy Services Limited.

First Trust Chindia ETF (FNI)

The ETF tracks an index of stocks from India and China. It bolts these two emerging markets skipping countries such as Malaysia, Taiwan, and South Korea. Its portfolio is made up of ADRs which further limits its market scope. While it changed its name in 2016, its investment policy remains.