Investors have been riding the waves of the emerging markets, seizing an opportunity that has been a long time coming. From the low point in mid-January to the peak in mid-April of 2024, the MSCI Emerging Markets Index surged by over 10%, offering some of the most lucrative returns in recent years for investors. The index, encompassing 24 emerging markets countries and accounting for 85% of each country’s free float-adjusted market capitalization, has sparked interest in emerging markets ETFs once again.
Comparing the performance over the last five years, the MSCI Emerging Markets Index delivered an annualized total return of 2.22% as of March 29, significantly trailing behind the 12.07% return of the MSCI World Index, which represents large-cap and mid-cap stocks from 23 developed countries, including the United States.
With the recent upturn, it appears that emerging markets could be poised for further growth in the forthcoming years. Malcolm Dorson, the head of emerging market strategy at Global X, highlighted the specific positive developments in China, South Korea, and Taiwan, suggesting a path of prosperity ahead.
Exploring JPMorgan Active China ETF (JCHI)
China, with a myriad of investment opportunities, is ably represented by the actively managed JPMorgan Active China ETF (JCHI). Despite its modest net assets of $10.13 million, the ETF holds a reputable Bronze rating on Morningstar.com. Utilizing local research analysts to identify undervalued industry leaders, the fund, managed by Li Tan and Rebecca Jiang, boasts a focused portfolio with 50 holdings that undergo complete turnover every five to six years.
The top sectors in the portfolio include communication services, consumer discretionary, and financials, offering exposure to familiar North American names like Tencent Holdings and Alibaba Group.
Diving into iShares MSCI South Korea ETF (EWY)
The iShares MSCI South Korea ETF (EWY) stands out as the largest South Korean ETF with net assets totaling $5 billion. With an expense ratio of 0.59%, the ETF, in existence since May 2000, has accumulated a significant gain of 221% on a cumulative basis.
Tracking the MSCI Korea 25/50 Index, comprising large-cap and mid-cap South Korean stocks, the ETF maintains a carefully balanced structure that limits single stock exposure to 25% and weights exceeding 5% to 50% of net assets. With a focus on technology, industrials, and financials, the portfolio holds 100 stocks, with the top 10 accounting for 51% of the total net assets.
Unpacking Franklin FTSE Taiwan ETF (FLTW)
The Franklin FTSE Taiwan ETF (FLTW), with $212 million in net assets and a Morningstar.com five-star rating, shines as a compelling investment option. Charging a mere 0.19% in fees, 40 basis points lower than its competitor, FLTW offers exposure to 123 holdings tracking the capped 25/50 Taiwan indexes.
The ETF, emphasizing the technology, financials, and materials sectors, delivers an annualized total return of 13.33% over the past five years, outperforming its peers. With large-cap stocks dominating the portfolio, FLTW presents substantial growth opportunities for investors.
As investors navigate the emerging markets landscape, these top ETFs present lucrative prospects for capitalizing on the recovery trend, offering diversified exposure to key economies such as China, South Korea, and Taiwan. With careful consideration and strategic investment decisions, investors can harness the potential growth and returns these markets have to offer.
