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This article identifies the best emerging market ETFs on the market.
Thanks to a handful of ETF providers, mainly BlackRock and Vanguard, you can easily invest in economies that are experiencing hyper-growth, such as India, Brazil, China, and South Africa.
Best Emerging Market ETFs
Here’s a quick snapshot of the best emerging market ETFs:
- iShares MSCI Emerging Markets ETF (EEM)
- Vanguard FTSE Emerging Markets ETF (VWO)
- iShares MSCI India ETF (INDA)
- Emerging Markets Internet & Ecommerce ETF (EMQQ)
- Invesco China Technology ETF (CQQQ)
- iShares Latin America 40 ETF (ILF)
- iShares MSCI South Africa ETF (EZA)
- iShares MSCI Saudi Arabia ETF (KSA)
Please note that these funds are not listed in any specific order. Ok, now let’s analyze each one to help you decide which, if any, are right for your portfolio.
#1. iShares MSCI Emerging Markets ETF (EEM)
- 1-Year Performance: -12%
- Expense Ratio: 0.70%
- Annual Dividend Yield: 1.47%
- AUM: $29B
- Number of Holdings: 1242
- Inception Date: 2003
The iShares MSCI Emerging Markets ETF is one of the first and largest emerging markets ETFs.
It primarily invests in China (32%), Taiwan (16%), South Korea (13%), and India (12%), with a focus on the Information Technology, Financials, and Consumer Discretionary markets.
EEM’s top holding is perhaps the most important company of the digital age: TSMC.
TSMC manufactures semiconductor chips that power our phones, laptops, cars, and pretty much everything else.
The likes of Apple, Nvidia, AMD, Qualcomm, Broadcom, and Samsung rely on TSMC’s chip manufacturing, which is relied on by Alphabet, Amazon, Tesla, and every other important company on Earth.
There are 1,241 other holdings in this ETF beyond TSMC, so you’re well-diversified beyond a single company, but there’s value in knowing your core holdings.
BlackRock launched a cheaper version of EEM in 2012 called the iShares Core MSCI Emerging Markets ETF (IEMG) with a nearly identical geographic breakdown and a group of core holdings.
IEMG is much cheaper than EEM, charging 0.11% in fees versus 0.70, and has about 1,300 additional holdings.
EEM Top Holdings:
- Taiwan Semiconductor Manufacturing Co. (2330:TAI) 7.49%
- Tencent Holdings (700:HKG) 4.27%
- Samsung Electronics (005930:KRX) 3.86%
- Alibaba Group Holdings (9988:HKG) 3.13%
- Meituan (3690:HKG) 1.43%
#2. Vanguard FTSE Emerging Markets ETF (VWO)
- 1-Year Performance: -8%
- Expense Ratio: 0.10%
- Annual Dividend Yield: 2.17%
- AUM: $82B
- Number of Holdings: 4377
- Inception Date: 2005
The Vanguard FTSE Emerging Markets ETF is the largest emerging markets ETF by assets under management.
Like the previously mentioned EEM, this ETF allocates most of its assets to the geographic regions of China (35%), Taiwan (20%), India (16%), and Brazil (5%).
However, VWO comes with a lower 0.10% expense ratio compared to EEM’s 0.70%.
You’ll see that VWO and EEM have similar top holdings and primarily invest in the Technology (25%), Financial (19%), and Consumer Discretionary (13%) sectors.
BlackRock created IEMG to compete with this Vanguard ETF. They are nearly identical.
VWO Top Holdings:
- Taiwan Semiconductor Manufacturing Co. (2330:TAI) 5.21%
- Tencent Holdings (700:HKG) 4.34%
- Alibaba Group Holdings (9988:HKG) 2.60%
- US Dollar (N/A) 1.96%
- Taiwan Semiconductor Manufacturing Co. Sponsored ADR (TSM) 1.51%
#3. iShares MSCI India ETF (INDA)
- 1-Year Performance: +11%
- Expense Ratio: 0.69%
- Annual Dividend Yield: 0.15%
- AUM: $6B
- Number of Holdings: 108
- Inception Date: 2012
The iShares MSCI India ETF provides exposure to large and mid-sized companies in India, giving investors access to 85% of the country’s stock market.
India is home to 1.38 billion people and has the fastest growing economy globally.
A forecast published by the Statistics Ministry suggests that India’s GDP will grow 9.2% in the fiscal year ending March 2022.
Additionally, the International Monetary Fund (IMF) expects India’s economy to grow 9.5% in 2021 and 8.5% in 2022. These are staggering GDP numbers.
For reference, the IMF expects the US and China to grow their GDPs 5.2% and 5.6%, respectively, in 2022.
There are several promising India ETFs to consider, but we think that INDA is your best option based on its equity exposure, fees, and liquidity.
INDA Top Holdings:
- Reliance Industries Limited (BOM:500325) 9.19%
- Infosys (BOM:500209) 8.25%
- Housing Development Finance Corp. Ltd. (BOM:500010) 6.02%
- ICICI Bank Limited (BOM:532174) 5.37%
- Tata Consultancy Services (BOM: 532540) 4.60%
#4. Emerging Markets Internet & Ecommerce ETF (EMQQ)
- 1-Year Performance: -44%
- Expense Ratio: 0.86%
- Annual Dividend Yield: 0.22%
- AUM: $949M
- Number of Holdings: 132
- Inception Date: 2014
The Emerging Markets Internet & Ecommerce ETF (EMQQ) offers exposure to the growth of online consumption in the developing world.
The fund’s holdings operate in regions such as India, China, Brazil, Turkey, Nigeria, and Indonesia, among others.
EMQQ companies must derive their profits from Internet or E-commerce activities. This includes a variety of search engines, online retail, social networking, payments, and gaming companies.
The fund’s investment thesis relies on a smartphone-enabled digital revolution to grow the global middle class to 5.5 billion people.
From EMQQ’s provider: “To this day, many emerging market ETFs continue to own state-owned enterprises in legacy industries, rather than focusing on the specific areas of the economy – internet, eCommerce, and digital innovation – that are primed for growth.”
EMQQ Top Holdings:
- Tencent Holdings (700:HKG) 9.19%
- Alibaba Group (BABA) 9.14%
- Meituan (3690:HKG)
- Reliance Industries (500325:BOM) 8.29%
- Prosus N.V. (PRX) 5.84%
#5. Invesco China Technology ETF (CQQQ)
- 1-Year Performance: -39%
- Expense Ratio: 0.70%
- Annual Dividend Yield: 0.54%
- AUM: $1.3B
- Number of Holdings: 115
- Inception Date: 2009
The Invesco China Technology ETF invests in large- and mid-cap Chinese technology companies.
It might feel incorrect to call China an “emerging market,” considering it is one of the world’s economic superpowers, but it’s deployed several economic development plans and reform programs that qualifies it as an emerging country.
Many of the funds we’ve discussed thus far have large allocations to Chinese companies, specifically Chinese tech companies, and take advantage of the loosely defined “emerging market.”
For example, EEM and VWO allocate a third of their fund to China-based stocks, many of which are anything but emerging.
They are quite literally some of the most powerful companies in the world.
Anyways, the Invesco China Technology ETF is 100% invested in the region and primarily interested in the economy’s Information Technology, Consumer Services, and Consumer Discretionary sectors.
CQQQ Top Holdings:
- Tencent Holdings (700:HKG) 10.94%
- Baidu Inc (BIDU) 8.85%
- Meituan (3690:HKG) 8.75%
- Sunny Optical Technology (2382:HKG) 6.72%
- Kuaishou Technology (1024:HKG) 6.67%
#6. iShares Latin America 40 ETF (ILF)
- 1-Year Performance: -12%
- Expense Ratio: 0.48%
- Annual Dividend Yield: 2.53%
- AUM: $893M
- Number of Holdings: 42
- Inception Date: 2001
The iShares Latin America 40 ETF (ILF) invests in the 40 largest Latin American equities.
ILF mainly focuses on resource-rich Brazil, allocating 57% of the fund to companies in this region.
Brazil is the second-largest economy in the Americas – behind only the US – and consistently a top ten global economy.
Brazil’s strong mining industry is driven by the company Vale (VALE), the largest producer of iron ore and nickel globally.
The mining of iron ore and nickel allows Brazil to be a top net exporter of steel globally.
Another Latin American country that receives a substantial allocation in ILF is Mexico.
The Mexican-based America Movil (AMXL) is a $1.28 trillion company that provides telecommunication services worldwide. It is the 7th largest mobile network operator in terms of equity subscribers.
Chile, Peru, Colombia, and the US each receive a portion of the remaining 18% of the fund.
BlackRock was kind enough to create ETFs for each of these Latin American countries, so you can invest more narrowly if you’re bullish on one specific country.
For example, there is the iShares MSCI Brazil ETF (EWZ), iShares MSCI Mexico ETF (EWW), iShares MSCI Chile ETF (ECH), iShares MSCI Peru ETF (EPU), iShares MSCI Colombia ETF (ICOL), and several leveraged funds designed for day-trading that are specific to each region.
ILF Top Holdings:
- Vale S.A. (VALE) 15.82%
- Petróleo Brasileiro (PBR.A & PBR) 12.02%
- America Movil (AMXL) 5.87%
- Itaú Unibanco Holding (ITUB) 5.14%
- Grupo Financiero Banorte (GFNORTEO:MEX) 4.53%
#7. iShares MSCI South Africa ETF (EZA)
- 1-Year Performance: +11%
- Expense Ratio: 0.59%
- Annual Dividend Yield: 4.73%
- AUM: $326M
- Number of Holdings: 40
- Inception Date: 2003
The iShares MSCI South Africa ETF (EZA) provides exposure to large and mid-sized companies in South Africa.
There are only 40 holdings in EZA. The top sectors include Financials (31%), Materials (26%), Consumer Discretionary (17%), and Communication (11%).
South Africa is the only G20 nation on the continent. It is perhaps the most industrialized, technologically advanced, and diversified economy in Africa.
The backbone of the South African economy is its natural resource extraction industry, but the rise of its banking sector has allowed the middle class to flourish.
The top holdings in EZA reflect these dynamics and are concentrated in them accordingly.
EZA Top Holdings:
- Naspers Limited (NPN) 13.81%
- FirstRand Limited (FSR) 7.94%
- MTN Group (MTN) 6.71%
- Standard Bank Group Limited (SBK) 4.65%
- Impala Platinum Holdings Limited (IMP) 4.59%
#8. iShares MSCI Saudi Arabia ETF (KSA)
- 1-Year Performance: +41%
- Expense Ratio: 0.74%
- Annual Dividend Yield: 1.05%
- AUM: $1.2B
- Number of Holdings: 89
- Inception Date: 2015
The iShares MSCI Saudi Arabia ETF (KSA) provides access to the Saudi Arabian stock market, historically closed to foreign investors.
Petroleum is the foundation of Saudi Arabia’s economy. Amongst all countries, it ranks first internationally in terms of oil reserves, holding about one-fifth of the world’s known reserves.
Saudi Aramco, the state-owned $2 trillion company that is the world’s largest oil producer, is the fourth largest holding in KSA.
In the 1970s, the Saudi Arabian government increased its ownership of Saudi Aramco to 100%.
Decades later, in 2019, the government took Saudi Aramco public at a ~$1.87 trillion valuations, making it the largest company globally by market cap.
However, the public raise only equated to 1.5% of the company’s value. This allows the Saudi Arabian government to maintain undisputed control over the company.
Nonetheless, there are other equities in KSA. Almost half of the fund consists of companies in the Financial sector.
As you will see below, the top five holdings make up about 50% of the entire ETF.
KSA Top Holdings:
- Al Rajhi Bank (1120:SAU) 15.39%
- Saudi National Bank (1180:SAU) 13.32%
- Saudi Basic Industries Corp (2010:SAU) 8.98%
- Saudi Arabian Oil Company (Saudi Aramco) (2222:SAU) 4.34%
- Saudi Telecom (7010:SAU) 4.25%
Alternatives to the Best Emerging Market ETFs
There are hundreds of emerging market ETFs; this list is obviously not exhaustive.
While the broad-based emerging market ETFs are largely similar, perhaps varying on fees to some degree, there are emerging market funds that narrowly focus on a specific country, equity size, or equity style.
Here are some other emerging market ETFs to consider:
- iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB)
- Schwab Emerging Markets Equity ETF (SCHE)
- iShares ESG Aware MSCI EM ETF (ESGE)
- SPDR Portfolio Emerging Markets ETF (SPEM)
- Invesco Emerging Markets Sovereign Debt ETF (PCY)
- iShares Emerging Markets Dividend ETF (DVYE)
- SPDR S&P Emerging Markets Small-Cap ETF (EWX)
BlackRock pretty much has a fund for every country.
You can invest in any country’s stock market if you’re willing to pay the fees.
Bottom Line: Best Emerging Market ETFs
There you have it – some of the best-emerging market ETFs.
Adding one or a combination of these funds will certainly diversify your portfolio.
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This article is for informational purposes only, and it is not intended to be investment advice. Read our editorial guidelines and public equities research methodology to learn more about how we selected the best-emerging market ETFs.
