Although emerging markets exchange traded funds are among this year’s most prolific asset gatherers in the U.S., some market observers argue that emerging markets equities are under-owned by big investors and that the asset class has more room to rally.
“Optimism about the outlook for economic growth, reduced concern about political turmoil and a jump in corporate profits are underpinning emerging-market assets this year, even as policy makers from Europe to the U.S. signal plans to pull back on stimulus,” according to Bloomberg. “Developing-economy stocks have climbed to a six-year high and valuations are at levels last seen in January 2010, indicating traders aren’t concerned about the impact of higher interest rates.”
Related: Emerging Markets ETFs Can Deliver More Gains
FTSE Russell, VWO’s index provider, does not classify South Korea as an emerging market, explaining a significant difference between this ETF and funds tracking the MSCI Emerging Markets Index. That also makes VWO’s declining volatility all the more surprising because South Korea is usually one of the most docile emerging markets.
For more information on the ETF market, visit our ETF performance reports category.
Tom Lydon’s clients own shares of VWO.