When it comes to getting exposure to emerging markets, it’s difficult to ignore adding China to the mix given its relative size. However, like a made-to-order hamburger, individuals can opt to hold the lettuce or in the case of investors, they can exclude exposure to China via the iShares MSCI Emerging Markets ex China ETF (NasdaqGM: EMXC).
Given the second largest economy’s recent slowdown, it’s a move to consider if investors still want exposure abroad.
“China is the 800-pound panda in any conversation about what is going on in the world today,” wrote Barron’s Reshma Kapadia. “The nation dominates the headlines, is the most-cited reason for sleeplessness among corporate executives, and puzzles investors daily. China looms particularly large for investors in the emerging markets: It represents an uncomfortably outsize stake in most portfolios. And fund managers are getting nervous.”
China investors could be in for a rude awakening when it comes to third quarter results, according to a quarterly survey by the China Beige Book, which cited slower growth and rising debt labels.
“Nationally, revenue, profits, output, sales volumes, and job growth all slowed from a quarter ago, as did both domestic and export orders,” the report said, which cited China Beige Book’s survey of more than 3,300 Chinese businesses.
EMXC seeks to track the investment results of the MSCI Emerging Markets ex China Index, which is designed to measure equity market performance in global emerging markets. The underlying index is a free float-adjusted market capitalization weighted index that captures large- and mid-capitalization stocks across 23 of the 24 Emerging Markets countries, excluding China.
EMXC generally will invest at least 90% of its assets in the component securities of the underlying index and may invest up to 10% of its assets in certain futures, options and swap contracts, cash and cash equivalents. While emerging markets started the year well, the U.S.-China trade war took its toll as the year wore on, but EMXC is up 4% year-to-date based on Yahoo Finance numbers.
An E-Commerce Option
Another way to get EM exposure is via e-commerce in funds like the Emerging Markets Internet & Ecommerce ETF (NYSEArca: EMQQ). EMQQ tracks an index of leading Internet and eCommerce companies serving Emerging Markets. It seeks to offer investors exposure to the growth of online consumption in the developing world. EMQQ holdings operate in diverse markets such as India, China, Brazil, Turkey, Nigeria, and Indonesia, to name a few. To be included, the companies must derive their profits from Ecommerce or Internet activities and include search engines, online retail, social networking, online video, e-payments, online gaming, and online travel.
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