Emerging Markets ETFs are poised for big growth as fast-paced emerging status countries are beginning to create a larger middle class. While this doesn’t necessarily signify that economic growth will translate into stock market returns, investment in countries like Brazil, Russia, India, and China, that show this type of expansion and development, can be a great way to diversify a portfolio and hedge against domestic risk.
As China particularly becomes more open to adopting actively-managed ETFs, that space could also see growth in the world’s second largest economy. Here is a list of the 10 best emerging markets ETFs for 2019:
EMQQ is a niche fund of emerging market Internet and tech stocks exclusively listed in the US. These stocks generally are in online shopping, e-commerce, and gaming, which naturally makes the fund a poor Fit to our far more generalist emerging-markets tech benchmark. Unsurprisingly, Chinese firms make up a large portion of EMQQ’s weighting. The fund is cap-weighted, but limits any single security to 8%. That said, the fund is rather concentrated among its top ten names, with sizeable positions in Tencent, Alibaba, and Baidu. Liquidity is good and spreads are generally fair, depending on the day. Block traders can be accommodated with the help of a market maker. Holding expenses are high at 0.86%, and tracking is very spotty, but this is an appealing and promising market segment for many investors who may be more tolerant of unpredictable holding costs.
KraneShares‘ KEMQ seeks to track the Solactive Emerging Markets Consumer Technology Index. The Index selects companies from 26 eligible countries within emerging markets whose primary business or businesses are internet retail, internet software/services, purchase, payment processing, or software for internet and E-Commerce transactions. The fund believes the growth of internet adoption within emerging markets is a long term secular theme that may continue to play out over the course of decades. The expense ratio is lofty at 0.79%.
The First Trust Chindia ETF is an exchange-traded fund. The investment objective of the Fund is to seek investment results that correspond generally to the price and yield, before fees and expenses, of an equity index called the ISE ChIndia Index™. The fund seeks to establish the total population of companies that are domiciled in either India or China and whose shares or ADRs are listed on a U.S. securities exchange. It the removes companies that do not meet the component eligibility criteria which include minimum market capitalization and trading volume requirements. Remaining stocks are ranked by their liquidity score, where all eligible stocks are ranked separately by market cap and three month average daily dollar volume, and the ranks are then added for each stock to get a liquidity score. The tETF then selects the top 25 stocks from each country by liquidity score. If less than 25 stocks are available for a country, then continue selecting stocks from the other country until a maximum of 50 stocks are selected. The ISE ChIndia IndexTM is rebalanced on the application of the above model on a semi-annual basis, and has an expense ratio of 0.59%.
The Invesco PureBeta℠ FTSE Emerging Markets ETF (the “Fund”) is based on the FTSE Emerging Index (the “Index”). The Fund will invest at least 90% of its total assets in securities, that comprise the Index, as well as American depositary receipts (ADRs) and global depositary receipts (GDRs) that represent securities in the Index. The Index measures the performance of large- and mid-capitalization emerging market countries. The Index is computed using the net return, which withholds applicable taxes for non-resident investors. The Fund and the Index are rebalanced quarterly at the close of business on the third Friday of March, June, September and December. It has a very reasonable expense ratio of 0.17%.
The Cambria Emerging Shareholder Yield ETF seeks investment results that closely correspond to the price and yield performance, before fees and expenses, of the Cambria Emerging Shareholder Yield Index. The Index consists of stocks with high cash distribution characteristics. The initial screening universe for this Index includes stocks in emerging market countries with market capitalizations over US $200 million. The Index is comprised of the 100 companies with the best combined rank of dividend payments and net stock buybacks, which are the key components of shareholder yield. The Index also screens for value and quality factors, and for companies that demonstrate low financial leverage. It has an expense ratio of 0.69%.
The Invesco BLDRS Emerging Markets 50 ADR Index Fund (the “Fund”) seeks to provide investment results that correspond generally, before fees and expenses, to the price and yield performance of the S&P/BNY Mellon Emerging Markets 50 ADR IndexSM (the “Index”). The Fund normally holds at least 95% of its total assets in depositary receipts (DR) that comprise the Index. The Index is capitalization-weighted and designed to track the performance of approximately 50 emerging market-based DRs. The Fund and the Index are rebalanced and reconstituted quarterly.
The Fund is an “index fund” that holds publicly traded DRs, negotiable U.S. securities that generally represent a non-U.S. company’s publicly traded equity or debt, of non-U.S. companies in a particular geographic region or market represented by a specified relevant benchmark S&P/BNY Mellon ADR Index. Like its sibling has a very reasonable expense ratio of 0.18%.
WisdomTree Emerging Markets ex-State-Owned Enterprises Fund seeks to track the investment results of emerging market companies that are not state-owned enterprises, which is defined as government ownership of more than 20%. The WisdomTree Emerging Markets ex-State-Owned Enterprises Index measures the performance of emerging markets stocks that are not state owned enterprises. State owned enterprises are defined as government ownership of more than 20% of outstanding shares of companies. The index employs a modified float-adjusted market capitalization weighting process to target the weights of countries in the universe prior to the removal of state owned enterprises while also limiting sector deviations to 3% of the starting universe. The Index was established with a base value of 200 on August 15, 2014. The expense ratio is 0.58%.
The Invesco BRIC ETF (the “Fund”) is based on the S&P/BNY Mellon BRIC Select DR Index (the “Index”). The Fund will invest at least 90% of its total assets in securities and American depositary receipts (ADRs) and global depositary receipts (GDRs) that are constituents of the Index. The Index is comprised of ADRs, GDRs and China H-Shares of Chinese equities, based on liquidity, from all depositary receipts of companies from four major emerging markets and China H-shares incorporated in mainland China and listed on the Hong Kong Stock Exchange. The index is computed using the net return, which withholds applicable taxes for non-resident investors. The Fund and the Index are rebalanced quarterly. The expense ratio is 0.64%.
The iShares MSCI BRIC ETF seeks to track the investment results of an index composed of Chinese equities that are available to international investors, and Brazilian, Russian, and Indian equities. The fund offers exposure to companies in Brazil, Russia, India, and China, providing targeted access to stocks in four major emerging market countries. Investors can use the ETF to customize an emerging markets allocation by expressing a regional view. The expense ratio is 0.67%
WisdomTree Emerging Markets Consumer Growth Fund seeks to track the investment results of companies in the consumer and non-consumer sectors that exemplify growth trends in emerging market consumers and their local economies. Investors gain exposure to targeted emerging market equity from companies with quality, growth, and valuation characteristics. The ETF can be used to complement emerging market exposure accessing consumer and local economic growth.
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