Emerging Markets ETF Party Isn't Over

With the iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG) up nearly 33% year-to-date, some investors are wondering if they have missed out on the emerging markets resurgence. IEMG is the low-cost alternative to the iShares MSCI Emerging Markets ETF (NYSEArca: EEM), which is also up about 33% this year.

Emerging markets are enjoying improved fundamentals thanks to corporate earnings improving as economic growth rebounds and strengthening currencies against the U.S. dollar on the back of improved economic outlooks.

“The underlying fundamentals for EM equities are improving after five years of declining profitability and weak earnings growth. Much attention goes to China, but we see opportunities well beyond this EM powerhouse,” said BlackRock in a recent note.

China is usually the largest country in diversified emerging markets ETFs, such EEM, IEMG and the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO). Due to massive inflows this year, IEMG is now the second-largest emerging markets ETF behind VWO. In addition to China, markets such as Brazil and India are driving upside for developing world equities.

Brazil’s central bank has not hiked interest rates since last year. Brazilian stocks have rallied this year and banks in Latin America’s largest economy appear inexpensive.