The outlook for emerging markets is bright, particularly for longer-term investors able to capitalize on the current discounted valuations.
Investors with an intermediate- to longer-term perspective will benefit from allocating to a China-focused, Asia, or broad emerging markets ETF while these funds are still trading at a discount. These regions are poised for continued growth as these economies are just starting to come out of COVID.
Despite the headwinds witnessed through much of 2022, Asia’s multi-year structural growth story continues to unfold, particularly in emerging economies such as Vietnam, Matthews Asia portfolio manager Yu Zhang wrote in an October insight.
“We remain constructive on the outlook for Asian equities but acknowledge that in the current risk-off environment selectivity remains key,” Zhang wrote. “Volatility in markets can be challenging but it can also present exceptional opportunities for those with dry powder to deploy and a long investment horizon. In our view, Asia equities today provide intriguing opportunities for investors.”
While there are plenty of passive funds on the market offering emerging markets exposure, an active ETF can capture more, better opportunities, and tactically navigate complex, volatile markets.
Matthews Asia has three active ETFs offering exposure to different segments of the emerging markets asset class. The lineup includes the Matthews Emerging Markets Equity Active ETF (MEM), the Matthews Asia Innovators Active ETF (MINV), and the Matthews China Active ETF (MCH).
MEM invests in emerging market companies with perceived sustainable growth potential, capitalizing on consumption and innovation trends. For investors who are unhappy with the overall shortcomings of an index ETF and want to be exposed to opportunities not only in Asia but also in countries like Brazil, MEM might be an ideal fit.
MINV, a high-conviction, concentrated equity portfolio, invests in innovative companies in Asia ex-Japan, capitalizing on the new economy and rising disposable income in the region. MINV is worth consideration for investors who want a more thematic and concentrated approach.
MCH is a high-conviction equity portfolio that seeks companies benefiting from China’s domestic consumption. MCH uses an all-cap fundamental GARP approach driven by proprietary research and combines long-term core holdings with more opportunistic ideas to provide consistency through cycles. MCH offers concentrated exposure to China but is more forward-thinking than indexes in terms of how it looks at very complex and large geography.
For more news, information, and analysis, visit the Emerging Markets Channel.