Futu Research | ETF Investment Research

[Emerging Market ETF] An Emerging Market ETF Investment Guide With Declining U.S. Stocks

Wall Street News reported that Fed rate cuts are expected to be on schedule in the second half of this year. Emerging markets may benefit from a decline in U.S. asset yields, attracting more capital inflows, and product yields in related capital markets are expected to increase, which may become a new investment hot spot in the future.

For broad investors, ETFs are safer and more diversified investments than stocks. This article will present a selection of the top 10 US equity market asset size rankings and emerging markets ETF products that have gained more than 5% year-to-date for reference.

1. Wealth Emerging Markets ETF-Vanguard (VWO):

Follow the FTSE Emerging Markets Full Stock Index. The FTSE Emerging Markets All-Share Index is provided by FCHS. It covers large, medium and small-cap stocks from emerging markets around the world, using a market capital-weighted approach.

Advantages: VWO is an option for low-cost investment in emerging markets, managed by Vanguard, which is favored for its low rates (0.08%) and wide market coverage.

Disadvantages: Although VWO offers broad market coverage, its diversity may mean that investment opportunities are not sufficiently concentrated in specific countries or industries, which may limit the potential high returns in these areas.

As of May 24, the ETF has an asset value of $80.617 billion, up 7.3% year-to-date in early 2024, a dividend yield of 3.31%, quarterly dividends and a management fee of 0.08%. The constituent stocks include well-known companies such as Tencent, TSMC.

2. Emerging Markets ETF-iShares (EEM):

Track the MSCI Emerging Markets Index. The MSCI Emerging Markets Index is a market-weighted index designed to measure the performance of emerging market national equity markets. It includes companies from Asia, Europe, Latin America, the Middle East and Africa, such as China, Korea, Taiwan, India and Brazil, etc.

Advantages: EEM offers a wide range of investment in these markets and is one of the most liquid and largest emerging market ETFs in the market.

Disadvantages: EEM has a relatively high transaction rate (0.7%), which may erode long-term investment returns, especially for small investors.

As of May 24, the ETF has an asset value of $18.471 billion, up 7.49% year-to-date in early 2024, a dividend yield of 2.47% and a management fee of 0.7%. The constituent stocks include well-known companies such as Tencent, Samsung and others.

3. iShares MSCI Emerging Markets ex China ETF (EMXC)：

Track the MSCI Emerging Markets Index (excluding China). The index is similar to the MSCI Emerging Markets Index, but excluding companies in the Chinese market, providing investors with an opening for emerging markets that do not directly invest in China.

Advantages: EMXC is suitable for those who want to diversify their emerging market investments but avoid the specific risks of the Chinese market.

Downside: By excluding China, EMXC may miss out on potential returns in one of the largest economies in this emerging market and one of the fastest growing markets in China.

As of May 24, the ETF has an asset value of $13.835 billion, up 5.18% year-to-date in early 2024, a dividend yield of 1.47% and a management fee of 0.25%. The constituent stocks include well-known companies such as Samsung, Philips and others.

4. Goldman Sachs ActiveBeta Emerging Markets Equity ETF (GEM):

Track the S&P Emerging Markets BMI Index. The S&P Emerging Markets BMI Index is part of the S&P Dow Jones Indices, which provides broad coverage of emerging market national stocks with stock options optimized by the Barclays Risk Model.

Advantage: GEM is designed to provide better risk-adjusted returns than traditional market-weighted indices through optimization methods.

Disadvantages: GEM uses the Barclays Risk Model to optimize stock selection, which may involve higher tracking errors and more complex management strategies, which may affect its performance.

As of May 24, the ETF has an asset value of $0.986 billion, up 6.58% year-to-date in early 2024, a dividend yield of 1.75% and a management fee of 0.3%. The constituent stocks include well-known companies such as Samsung, TSMC.

5. SPDR Portfolio Emerging Markets ETF (SPEM)：

Track the MSCI Emerging Markets Non-Fossil Fuel Index. The index, provided by MSCI, aims to measure the performance of emerging market stocks while excluding those companies with fossil fuel reserves. This includes companies whose main business involves the exploration, production, refining and sale of fossil fuels such as oil, gas, coal.

Advantage: Emphasizing environmental, social and governance (ESG) investment principles, the index is suitable for investors looking to invest in emerging markets while avoiding the fossil fuel industry. The ETF currently has a trading rate of 0.07%.

Disadvantages: SPEM excludes fossil fuel companies, which may limit their performance in energy-intensive markets and may miss out on some energy-related investment opportunities.

As of May 24, the ETF has an asset value of $9.168 billion, up 7.51% year-to-date in early 2024, a dividend yield of 2.61% and a management fee of 0.07%. The constituent stocks include well-known companies such as Samsung, Ali, TSMC.

6. SPDR S&P Emerging Asia-Pacific ETF (GMF):

Track the MSCI Global Select Metals & Mining Indices. The index focuses on the metals and mining sectors globally, including large and medium-sized metals, mining and smelting companies. The index covers multiple sub-sectors from iron ore to precious metals.

Advantage: The index provides broad coverage of the global metals and mining industries, including those that are critical to the global economy and industrial production, and the ETF currently has a trading rate of 0.49%.

Disadvantages: GMF focuses on the metals and mining sectors, which may make it more sensitive to commodity price fluctuations and global economic cycles, which may lead to higher volatility.

As of May 24, the ETF has an asset value of $0.366 billion, up 9.76% year-to-date in early 2024, a dividend yield of 2.50% and a management fee of 0.49%. The constituent stocks include well-known companies such as TSMC, Ali and others.

Summing up:

The products presented above are emerging market ETFs with a high reputation in the market today, each with its own advantages and disadvantages. In terms of yield, VWO is undoubtedly the most attractive product; in terms of annualized yield, GMF is the best performing ETF product for the Asia-Pacific region. It is recommended that you choose the right product based on your investment preferences to maximize profits.

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On this page

1. Wealth Emerging Markets ETF-Vanguard (VWO):
2. Emerging Markets ETF-iShares (EEM):
3. iShares MSCI Emerging Markets ex China ETF (EMXC)：
4. Goldman Sachs ActiveBeta Emerging Markets Equity ETF (GEM):
5. SPDR Portfolio Emerging Markets ETF (SPEM)：
6. SPDR S&P Emerging Asia-Pacific ETF (GMF):
Summing up: