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5 Emerging Market ETFs Surging to Start 2021

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Emerging market stocks continued their year-end rally to start 2021 buoyed by a wider rollout of COVID-19 vaccines as well as Joe Biden’s victory in the U.S. presidential election.

The vaccine has set the stage for global economic recovery, thereby bolstering investors‘ confidence in riskier assets. Meanwhile, the incoming Biden presidency seems beneficial for the emerging markets. This is especially true as the administration is looking for a bigger fiscal package and infrastructure spending that would lead to increased demand for concrete and cement, energy, heavy machinery, materials, and industrial products from companies in emerging markets. Cheap money flows and lower rates across the globe added to the strength (read: 5 ETFs to Buy For the Blue Wave).

In fact, the MSCI Emerging Markets Index is up 80% from the March rout seen last year as these stocks have added $10.8 trillion in just over nine months, representing the fastest bout of wealth creation in the history of emerging markets. With the recent rally, emerging market stocks, which bore the brunt of all the economic and political upheavals from taper tantrum to slowing growth in China and Donald Trump’s trade war, came roaring back after 13 years of underperformance.

An impressive rally was also driven by a 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 given the trillions of cheap money flowing into the economy and the prospect of further easing (read: U.S. Dollar Sees First Drop Since 2017: ETFs & Stocks to Buy).

While many emerging market ETFs have been soaring, we highlight five ETFs that are leading the space to start the year. These are also expected to continue outperforming, provided the fundamentals remain intact.

iShares MSCI UAE ETF (UAE - Free Report) – Up 9.1%

This fund offers exposure to a broad range of companies in the United Arab Emirates (UAE - Free Report) by tracking the MSCI All UAE Capped Index. It holds 32 stocks in its basket with heavy concentration on the top three firms. The ETF has accumulated $14.5 million in its base and trades in an average daily volume of 15,000 shares. It charges 59 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

VictoryShares Emerging Market Volatility Weighted ETF – Up 88.1%

It offers exposure to the broad emerging market equities by tracking the Nasdaq Victory Emerging Markets 500 Volatility Weighted Index. This ETF combines fundamental criteria and volatility, weighting in an effort to outperform the traditional cap-weighted indexing strategies. Holding a portfolio of 499 well-diversified stocks, it allocates 19.6% in China, 19.5% in Taiwan, and 17.8% in India. The product has AUM of $9.8 million and an expense ratio of 1.03%. It trades in an average daily volume of less than 1,0000 shares.

KraneShares MSCI One Belt One Road ETF (OBOR - Free Report) – Up 7.4%

This fund follows the MSCI Global China Infrastructure Exposure Index, which aims to identify the potential beneficiaries of the One Belt One Road initiative based on how their geography, revenues, and sector attributes align with the broad theme. Holding 137 stocks in its basket, none of the firms accounts for more than 6% share. The ETF has AUM of $8.5 million and charges 80 bps in fees per year. It trades in an average daily volume of 2,000 shares.

RAFI Dynamic Multi-Factor Emerging Markets Equity ETF (MFEM - Free Report) – Up 7.4%

This fund follows the RAFI Dynamic Multi-Factor EM index, a strategy that has time-varying exposure to four return factors: value, low volatility, quality and momentum. With AUM of $844.2 million, it holds 591 stocks in its basket and charges 49 bps in annual fees. Volume is lower at 21,000 shares (read: 5 ETFs to Add to Your Portfolio in 2021).

Global X MSCI Nigeria ETF (NGE - Free Report) – Up 7.4%

NGE offers exposure to the largest and most-liquid Nigerian securities. Holding 20 stocks in its basket, the fund has heavy concentration on the top three firms, which collectively make up for 36.2% share. It has accumulated $44.2 million in its asset base and has 0.89% in expense ratio. The average daily volume is lower at 24,000 shares. However, NGE has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook.

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