Finding Global Emerging Market ETF Opportunities

Developed markets have led the charge, with the U.S. experiencing multi-year rally, but now, investors may be turning to developing economies and emerging market-related exchange traded funds in search of untapped opportunities.

We are beginning to see a shift to emerging market assets. After an encouraging first quarter, emerging market equities experienced inflows for the first time in five years, according to a Legg Mason note.

On Wednesday, the emerging markets rose the most in six weeks and hit a one-week high. The improved confidence in financial markets has outweighed anxiety over the Federal Reserve’s hawkish stance on interest rates, with a potential hike next month, Bloomberg reports.

Related: Emerging Market ETFs Are Turning Around

“Economic development over the last two decades has made emerging markets significant drivers of global growth,” Michael LaBella, portfolio manager at QS Investors and manager of the Legg Mason Emerging Markets Diversified Core ETF (EDBI), said in the note. “Ten years ago EMs represented 25 percent of global gross domestic product – but they now account for nearly 40%. With annual growth rates double those of the U.S., emerging markets’ share of global gross domestic product has the potential to grow. That can create opportunities.”

However, the positive momentum is not shared equally with the broad emerging market group. Developing economies are a heterogeneous with significantly variant economic, political and developmental differences.


For instance, among the top performers this year, Peru and Brazil have returned almost 40%, whereas Chinese equities dipped 9% and Greece fell 5%.