ETFs
3 Emerging Markets ETFs Poised for Growth in 2024
As the world continues to evolve, emerging markets are shining brightly on the economic stage. Countries like China, India, Brazil, and Mexico are experiencing rapid industrialization and urbanization, resulting in increased consumer spending and investment opportunities. For those looking to diversify and capitalize on this growth, emerging market ETFs could be a smart choice.
Why invest in emerging markets ETFs? These funds provide exposure to a broad range of economies and sectors, capturing the dynamic and rapid growth these markets are experiencing.
Below I have highlighted three fundamentally strong emerging market ETFs: the iShares MSCI Emerging Markets ETF (EEM), the Vanguard Emerging Markets Equity Index Fund (VWO) and the iShares Core MSCI Emerging Markets ETF (IEMG). These funds have high return potential and solid growth this year and have been rated “Strong Buy” in our proprietary rating system.
The International Monetary Fund (IMF) predicts that the global economy will grow by 3.2% in 2024 and 2025. While advanced economies are expected to grow at a modest pace of 1.7% to 1.8%, emerging markets and developing economies are expected to grow at a rate of 4.2%.
What is driving this growth? Large emerging markets are becoming engines of economic expansion, fueled by demographic shifts and an expanding consumer base. For example, Guyana is expected to lead the pack with a CAGR of 19.8% from 2024 to 2029.
Mozambique, Rwanda and Bangladesh follow closely, with compound annual growth rates of 7.9%, 7.2% and 6.8% respectively. Meanwhile, emerging economies such as China, India, Brazil, Indonesia and Mexico are expected to grow faster than major advanced economies over the next decade.
In this booming environment, investing in emerging market ETFs can be a strategic move to benefit from robust growth and diversify your portfolio. With that in mind, let’s take a look at the fundamentals of the top three Emerging Markets Equity ETFstarting with number 3.
ETF #3: iShares MSCI Emerging Markets ETF (EEM)
EEM is a fund launched by BlackRock, Inc. and managed by BlackRock Fund Advisors. It invests in equity markets in emerging regions around the world and in equities of companies operating in diversified sectors. The fund seeks to track the performance of the MSCI Emerging Markets Index using a representative sampling technique.
The fund has assets under management (AUM) of $19.08 billion. main participations include Taiwan Semiconductor Manufacturing Co., Ltd. (TSM), which has a weighting of 9.57%. Tencent Holdings Ltd. (TCEHY) is next with 4.16%, followed by Samsung Electronics Co., Ltd. and Alibaba Group Holding Limited (BABA) at 3.72% and 1.86% respectively.
The ETF has a total of 1,212 holdings, with the top 10 holdings accounting for 26.12% of its AUM. EEM’s expense ratio is 0.70%, which is higher than the category average of 0.50%. Over the past three months, its inflows have amounted to $215.98 million.
The fund pays an annual contribution dividend The fund has a yield of $1.04, which translates to a yield of 2.39% at the current price level. Its dividend payments have grown at a CAGR of 10.9% over the past three years. The fund’s four-year average yield is 2.22%.
Over the past nine months, EEM has gained 16.6% to close the last trading session at $43.45. It has also gained 9.9% over the past six months. The fund’s net asset value was $43.37 as of July 3, 2024.
EEM POWR Ratings reflect this promising outlook. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system. POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
EEM has been awarded an A grade for Trade and Buy & Hold. Among the 101 ETFs in the A category Emerging Markets Equity ETF group, it is ranked #3. Click here to see EEM’s peer rating.
ETF #2: Vanguard Emerging Markets Equity Index Fund (VWO)
VWO is an exchange-traded fund launched and managed by The Vanguard Group, Inc. It invests in stocks of companies located in emerging markets around the world, such as China, Brazil, Taiwan and South Africa. The fund tracks the performance of the FTSE Emerging Markets All Cap China A Inclusion Index using a representative sampling technique.
With $79.15 billion in assets under management, VWO main participations TSM shares are 7.55%, TCEHY 3.56%, and Vanguard Cash Management Market Liquidity Fund and BABA 2.21% and 2.06% respectively. The ETF has 4,762 holdings, with its top 10 assets representing 21.73% of its AUM.
The fund’s expense ratio is 0.08%, lower than the category average of 0.50%. VWO fund inflows were $1.3 million in the last five days and $233.32 million in the last year.
VWO pays an annual dividend of $1.40, which translates to a yield of 3.14% at the current price level. Additionally, the fund’s dividend payments have grown at CAGRs of 9.2% and 5.1% over the past three and five years, respectively.
VWO has gained 15.8% over the past nine months and 8.7% over the past year to close the last trading session at $44.67. Its beta is 0.87. The net asset value was $44.61 as of July 3, 2024.
VWO’s POWR Ratings reflect a strong outlook. The company’s overall rating is A, which is a Strong Buy in our proprietary rating system.
VWO has been awarded an A grade for both Trade and Buy & Hold categories. It is ranked #2 among the 101 ETFs in the Emerging Markets Equities ETFs group.
Beyond what we have stated above, we have also given VWO a rating for Peer. Get all VWO ratings here.
ETF #1: iShares Core MSCI Emerging Markets ETF (IEMG)
IEMG offers exceptional coverage of emerging markets and was launched by BlackRock. It provides comprehensive exposure by including smaller companies in the portfolio. IEMG tracks a market capitalization-weighted index of emerging market companies, covering 99% of market capitalization.
With $79.46 billion in assets under management, its main participations The group’s top companies are TSM, with a weighting of 8.12%, followed by TCEHY, with a weighting of 3.53%, and Samsung Electronics Co., Ltd. and BABA, with 3.16% and 1.57%, respectively. IEMG holds a total of 2,892 holdings, with the top 10 assets accounting for 22.17% of its assets under management.
The fund’s expense ratio is 0.09%, which is lower than the category average of 0.50%. The IEMG fund had inflows of $1.57 billion over the past year. It also has a beta of 0.97.
The fund pays an annual dividend of $1.49, which translates to a yield of 2.73% at the current price level. Its dividend payments have grown at a CAGR of 7.6% over the past three years, and its four-year average yield is 2.75%.
IEMG has gained 16.6% over the past nine months and 7.8% year-to-date to close the last trading session at $54.53. The fund has a NAV of $54.44 as of July 3, 2024.
IEMG’s strong fundamentals are reflected in its POWR Ratings. The fund has an overall rating of A, which is a Strong Buy in our proprietary rating system.
The fund received an A grade for Trade, Buy & Hold and a B grade for Peer. IEMG tops the list of 101 ETFs in the same group rated A. To access the full POWR Ratings for IEMG, Click here.
What to do next?
Get your hands on this special report featuring 3 low-cost companies with huge upside potential, even in today’s volatile markets:
3 actions to DOUBLE this year >
As of Thursday morning, VWO shares were trading at $44.67 per share, up $0.65 or 1.48%. Year-to-date, VWO has gained 9.20%, compared to a 16.76% gain in the benchmark S&P 500 index over the same period.
About the Author: Shweta Kumari
Shweta’s deep interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help individual investors make informed investment decisions. More…