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Emerging Markets Hit Record High: 5 Top-Performing ETFs YTD
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The global rally buoyed by vaccine optimism and fresh U.S. stimulus hopes have not only pushed the U.S. stock market to a new peak but also driven emerging markets to new heights. This is especially true as the MSCI Emerging Market Index, which spans 27 countries, surged past the highs reached in January 2018.
Vaccine
The encouraging study results from AstraZeneca (AZN - Free Report) , Moderna (MRNA - Free Report) and Pfizer (PFE - Free Report) related to COVID-19 vaccines has spurred investors’ sentiment. Markets anticipate the availability of vaccines soon, which may lead to the end of the pandemic and swift economic recovery. In fact, the U.K. has become the first country that started the vaccination program developed by Pfizer. The first 800,000 doses will be given to people over 80 years who are either hospitalized or already have outpatient appointments scheduled, along with nursing home workers (read: Pfizer's Coronavirus Vaccine Gets a Nod in UK: ETFs to Shine).
The central banks across the globe have been on bond-buying spree to fight the fallout from the pandemic, according to the Bloomberg report. The U.S. Federal Reserve, Bank of England, Bank of Japan and the European Central Bank have splurged $5.6 trillion this year on quantitative easing.
The market is anticipating additional stimulus from the United States given fresh coronavirus relief funding negotiations. Per reports, lawmakers and the White House are progressing toward a fresh stimulus for the coronavirus-stricken economy. The White House unveiled a $916 billion stimulus proposal in a final rush to break months of negotiations.
Other Factors
Despite rising coronavirus cases and re-initiation of restrictions in many parts of the world, the economy has been on the mend. In China, a recent survey revealed that the factory sector accelerated at the fastest pace in a decade in November. This suggests that the world’s second-largest economy has recovered to the pre-pandemic levels. Several other countries also reported sharp upticks in factory activity. The latest data showed that the South African economy rebounded by a massive 66.1% in the third quarter, reflecting the economy’s recovery from the height of the COVID-19 lockdown.
An impressive rally also came on the back of the weak dollar against the basket of currencies that has been pulling in more capital into the emerging markets. The greenback is expected to remain under pressure in the short term given the trillions of cheap money flowing into the economy and the prospect of further easing (read: Dollar Declines: What Awaits the Currency ETFs in 2021?).
While many emerging market ETFs have been performing remarkably well, we highlight five funds that are leading the space from a year-to-date basis. These are also expected to continue outperforming, provided the fundamentals remain intact.
This fund tracks the Solactive Emerging Markets Consumer Technology Index, which 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. It holds 50 stocks in its basket with none accounting for more than 4.7% of assets. The product charges 61 bps in annual fees and has amassed $93.5 million in its asset base. It trades in an average daily volume of 14,000 shares (read: Online Holiday Shopping Hit Records: ETFs to Win & Lose).
Columbia Emerging Markets Consumer ETF (ECON - Free Report) – Up 15.4%
This ETF focuses exclusively on opportunities in emerging markets' consumer growth sectors by tracking the Dow Jones Emerging Markets Consumer Titans Index. It holds 60 stocks in its basket with key holdings in consumer discretionary, consumer services, and consumer staples while charges 59 bps in annual fees. China takes the largest share at 57.3% of the portfolio while India and Taiwan round off the next spot with double-digit exposure. The fund has accumulated $176.6 million in its asset base and a Zacks ETF Rank #4 (Sell) with a Medium risk outlook.
iShares ESG Aware MSCI EM ETF (ESGE - Free Report) – Up 14.4%
With AUM of $5.7 billion, this ETF offers exposure to large- and mid-cap emerging market stocks with favorable environmental, social and governance (ESG) practices. It follows the MSCI Emerging Markets Extended ESG Focus Index and holds 344 stocks in its basket. Financials, information technology, consumer discretionary, and communications are the top four sectors with double-digit exposure each. From a country look, China takes the top spot at 37.2% followed by Taiwan (13.7%) and South Korea (12.8%). The fund charges 25 bps in annual fees and trades in volume of 1.6 million shares.
The fund targets the emerging stock market with no currency risk and tracks the MSCI Emerging Markets 100% USD Hedged Index. It has key holdings in information technology, consumer discretionary, financials and communications and China takes the largest share at 39.6% of the portfolio while South Korea and Taiwan round off the next two spots. The product has AUM of $183.7 million and trades in solid volume of 34,000 shares. It charges 68 bps in fees per year from investors and has a Zacks ETF Rank #4 with a Medium risk outlook.
This ETF offers exposure to a broad range of emerging market companies by tracking the MSCI Emerging Markets Investable Market Index. It holds a broad basket of 2,539 stocks with key holdings in information technology, consumer discretionary, financials, and communication. China takes the largest share at 35.6% while Taiwan and South Korea make up for more than 13% share each. The product has AUM of $63.5 billion and charges 13 bps in annual fees. It trades in an average daily volume of about 13 million shares and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: 5 ETFs to Buy on a Weak Dollar).
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Emerging Markets Hit Record High: 5 Top-Performing ETFs YTD
The global rally buoyed by vaccine optimism and fresh U.S. stimulus hopes have not only pushed the U.S. stock market to a new peak but also driven emerging markets to new heights. This is especially true as the MSCI Emerging Market Index, which spans 27 countries, surged past the highs reached in January 2018.
Vaccine
The encouraging study results from AstraZeneca (AZN - Free Report) , Moderna (MRNA - Free Report) and Pfizer (PFE - Free Report) related to COVID-19 vaccines has spurred investors’ sentiment. Markets anticipate the availability of vaccines soon, which may lead to the end of the pandemic and swift economic recovery. In fact, the U.K. has become the first country that started the vaccination program developed by Pfizer. The first 800,000 doses will be given to people over 80 years who are either hospitalized or already have outpatient appointments scheduled, along with nursing home workers (read: Pfizer's Coronavirus Vaccine Gets a Nod in UK: ETFs to Shine).
Other firms like Sanofi (SNY - Free Report) , GlaxoSmithKline's (GSK - Free Report) , Merck (MRK - Free Report) and Johnson & Johnson (JNJ - Free Report) are also in the process of developing their vaccines.
Stimulus Bets
The central banks across the globe have been on bond-buying spree to fight the fallout from the pandemic, according to the Bloomberg report. The U.S. Federal Reserve, Bank of England, Bank of Japan and the European Central Bank have splurged $5.6 trillion this year on quantitative easing.
The market is anticipating additional stimulus from the United States given fresh coronavirus relief funding negotiations. Per reports, lawmakers and the White House are progressing toward a fresh stimulus for the coronavirus-stricken economy. The White House unveiled a $916 billion stimulus proposal in a final rush to break months of negotiations.
Other Factors
Despite rising coronavirus cases and re-initiation of restrictions in many parts of the world, the economy has been on the mend. In China, a recent survey revealed that the factory sector accelerated at the fastest pace in a decade in November. This suggests that the world’s second-largest economy has recovered to the pre-pandemic levels. Several other countries also reported sharp upticks in factory activity. The latest data showed that the South African economy rebounded by a massive 66.1% in the third quarter, reflecting the economy’s recovery from the height of the COVID-19 lockdown.
An impressive rally also came on the back of the weak dollar against the basket of currencies that has been pulling in more capital into the emerging markets. The greenback is expected to remain under pressure in the short term given the trillions of cheap money flowing into the economy and the prospect of further easing (read: Dollar Declines: What Awaits the Currency ETFs in 2021?).
While many emerging market ETFs have been performing remarkably well, we highlight five funds that are leading the space from a year-to-date basis. These are also expected to continue outperforming, provided the fundamentals remain intact.
KraneShares Emerging Markets Consumer Technology ETF (KEMQ - Free Report) – Up 32.6%
This fund tracks the Solactive Emerging Markets Consumer Technology Index, which 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. It holds 50 stocks in its basket with none accounting for more than 4.7% of assets. The product charges 61 bps in annual fees and has amassed $93.5 million in its asset base. It trades in an average daily volume of 14,000 shares (read: Online Holiday Shopping Hit Records: ETFs to Win & Lose).
Columbia Emerging Markets Consumer ETF (ECON - Free Report) – Up 15.4%
This ETF focuses exclusively on opportunities in emerging markets' consumer growth sectors by tracking the Dow Jones Emerging Markets Consumer Titans Index. It holds 60 stocks in its basket with key holdings in consumer discretionary, consumer services, and consumer staples while charges 59 bps in annual fees. China takes the largest share at 57.3% of the portfolio while India and Taiwan round off the next spot with double-digit exposure. The fund has accumulated $176.6 million in its asset base and a Zacks ETF Rank #4 (Sell) with a Medium risk outlook.
iShares ESG Aware MSCI EM ETF (ESGE - Free Report) – Up 14.4%
With AUM of $5.7 billion, this ETF offers exposure to large- and mid-cap emerging market stocks with favorable environmental, social and governance (ESG) practices. It follows the MSCI Emerging Markets Extended ESG Focus Index and holds 344 stocks in its basket. Financials, information technology, consumer discretionary, and communications are the top four sectors with double-digit exposure each. From a country look, China takes the top spot at 37.2% followed by Taiwan (13.7%) and South Korea (12.8%). The fund charges 25 bps in annual fees and trades in volume of 1.6 million shares.
iShares Currency Hedged MSCI Emerging Markets ETF (HEEM - Free Report) – Up 14.3%
The fund targets the emerging stock market with no currency risk and tracks the MSCI Emerging Markets 100% USD Hedged Index. It has key holdings in information technology, consumer discretionary, financials and communications and China takes the largest share at 39.6% of the portfolio while South Korea and Taiwan round off the next two spots. The product has AUM of $183.7 million and trades in solid volume of 34,000 shares. It charges 68 bps in fees per year from investors and has a Zacks ETF Rank #4 with a Medium risk outlook.
iShares Core MSCI Emerging Markets ETF (IEMG - Free Report) – Up 13.8%
This ETF offers exposure to a broad range of emerging market companies by tracking the MSCI Emerging Markets Investable Market Index. It holds a broad basket of 2,539 stocks with key holdings in information technology, consumer discretionary, financials, and communication. China takes the largest share at 35.6% while Taiwan and South Korea make up for more than 13% share each. The product has AUM of $63.5 billion and charges 13 bps in annual fees. It trades in an average daily volume of about 13 million shares and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: 5 ETFs to Buy on a Weak Dollar).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>