Emerging market exchange traded funds have burst from the gate in 2012 on signs of improvement in the global economy and a stock rally that’s favored riskier sectors.

Although volatile, emerging market ETFs could see further gains if European leaders can find a way to ease concerns over Greece and banks’ exposure to sovereign debt.

“To the extent the situation in Europe does not degenerate into a full-blown crisis, even a modest improvement in liquidity and sentiment would be supportive of emerging market stocks,” writes iShares chief investment strategist Russ Koesterich in a market outlook.

He said factors supporting emerging market ETFs include faster economic growth, improving sentiment from low levels, better credit conditions, and valuation, since they are trading at a premium to developed markets. [Emerging Market ETFs Could Rally More on Economy, Valuations]

Vanguard Emerging Markets (NYSEArca: VWO) and iShares MSCI Emerging Markets (NYSEArca: EEM) are among the largest diversified ETFs tracking emerging markets. [Emerging Market ETFs Double S&P 500’s Gain]

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.