Futu Research | ETF Investment Research

Views 30862024.11.12

[Emerging Market ETF] An Emerging Market ETF Investment Guide With Declining U.S. Stocks

Wall Street News reported that Fed rate cuts are expected to be on schedule in the second half of this year. Emerging markets may benefit from a decline in U.S. asset yields, attracting more capital inflows, and product yields in related capital markets are expected to increase, which may become a new investment hot spot in the future.

For broad investors, ETFs are safer and more diversified investments than stocks. This article will present a selection of the top 10 US equity market asset size rankings and emerging markets ETF products that have gained more than 5% year-to-date for reference.

1. Wealth Emerging Markets ETF-Vanguard (VWO):

Follow the FTSE Emerging Markets Full Stock Index. The FTSE Emerging Markets All-Share Index is provided by FCHS. It covers large, medium and small-cap stocks from emerging markets around the world, using a market capital-weighted approach.

Advantages: VWO is an option for low-cost investment in emerging markets, managed by Vanguard, which is favored for its low rates (0.08%) and wide market coverage.

Disadvantages: Although VWO offers broad market coverage, its diversity may mean that investment opportunities are not sufficiently concentrated in specific countries or industries, which may limit the potential high returns in these areas.

As of May 24, the ETF has an asset value of $80.617 billion, up 7.3% year-to-date in early 2024, a dividend yield of 3.31%, quarterly dividends and a management fee of 0.08%. The constituent stocks include well-known companies such as Tencent, TSMC.

2. Emerging Markets ETF-iShares (EEM):

Track the MSCI Emerging Markets Index. The MSCI Emerging Markets Index is a market-weighted index designed to measure the performance of emerging market national equity markets. It includes companies from Asia, Europe, Latin America, the Middle East and Africa, such as China, Korea, Taiwan, India and Brazil, etc.

Advantages: EEM offers a wide range of investment in these markets and is one of the most liquid and largest emerging market ETFs in the market.

Disadvantages: EEM has a relatively high transaction rate (0.7%), which may erode long-term investment returns, especially for small investors.

As of May 24, the ETF has an asset value of $18.471 billion, up 7.49% year-to-date in early 2024, a dividend yield of 2.47% and a management fee of 0.7%. The constituent stocks include well-known companies such as Tencent, Samsung and others.

3. iShares MSCI Emerging Markets ex China ETF (EMXC):

Track the MSCI Emerging Markets Index (excluding China). The index is similar to the MSCI Emerging Markets Index, but excluding companies in the Chinese market, providing investors with an opening for emerging markets that do not directly invest in China.

Advantages: EMXC is suitable for those who want to diversify their emerging market investments but avoid the specific risks of the Chinese market.

Downside: By excluding China, EMXC may miss out on potential returns in one of the largest economies in this emerging market and one of the fastest growing markets in China.

As of May 24, the ETF has an asset value of $13.835 billion, up 5.18% year-to-date in early 2024, a dividend yield of 1.47% and a management fee of 0.25%. The constituent stocks include well-known companies such as Samsung, Philips and others.

4. Goldman Sachs ActiveBeta Emerging Markets Equity ETF (GEM):

Track the S&P Emerging Markets BMI Index. The S&P Emerging Markets BMI Index is part of the S&P Dow Jones Indices, which provides broad coverage of emerging market national stocks with stock options optimized by the Barclays Risk Model.

Advantage: GEM is designed to provide better risk-adjusted returns than traditional market-weighted indices through optimization methods.

Disadvantages: GEM uses the Barclays Risk Model to optimize stock selection, which may involve higher tracking errors and more complex management strategies, which may affect its performance.

As of May 24, the ETF has an asset value of $0.986 billion, up 6.58% year-to-date in early 2024, a dividend yield of 1.75% and a management fee of 0.3%. The constituent stocks include well-known companies such as Samsung, TSMC.

5. SPDR Portfolio Emerging Markets ETF (SPEM):

Track the MSCI Emerging Markets Non-Fossil Fuel Index. The index, provided by MSCI, aims to measure the performance of emerging market stocks while excluding those companies with fossil fuel reserves. This includes companies whose main business involves the exploration, production, refining and sale of fossil fuels such as oil, gas, coal.

Advantage: Emphasizing environmental, social and governance (ESG) investment principles, the index is suitable for investors looking to invest in emerging markets while avoiding the fossil fuel industry. The ETF currently has a trading rate of 0.07%.

Disadvantages: SPEM excludes fossil fuel companies, which may limit their performance in energy-intensive markets and may miss out on some energy-related investment opportunities.

As of May 24, the ETF has an asset value of $9.168 billion, up 7.51% year-to-date in early 2024, a dividend yield of 2.61% and a management fee of 0.07%. The constituent stocks include well-known companies such as Samsung, Ali, TSMC.

6. SPDR S&P Emerging Asia-Pacific ETF (GMF):

Track the MSCI Global Select Metals & Mining Indices. The index focuses on the metals and mining sectors globally, including large and medium-sized metals, mining and smelting companies. The index covers multiple sub-sectors from iron ore to precious metals.

Advantage: The index provides broad coverage of the global metals and mining industries, including those that are critical to the global economy and industrial production, and the ETF currently has a trading rate of 0.49%.

Disadvantages: GMF focuses on the metals and mining sectors, which may make it more sensitive to commodity price fluctuations and global economic cycles, which may lead to higher volatility.

As of May 24, the ETF has an asset value of $0.366 billion, up 9.76% year-to-date in early 2024, a dividend yield of 2.50% and a management fee of 0.49%. The constituent stocks include well-known companies such as TSMC, Ali and others.

Summing up:

The products presented above are emerging market ETFs with a high reputation in the market today, each with its own advantages and disadvantages. In terms of yield, VWO is undoubtedly the most attractive product; in terms of annualized yield, GMF is the best performing ETF product for the Asia-Pacific region. It is recommended that you choose the right product based on your investment preferences to maximize profits.

Learn more about what an ETF is, an ETF investment guide

One-stop trading with Futubull

Enjoy welcome rewards and lifetime 0 commission on HK stocks

Terms and conditions apply right-arrow

| GENERAL DISCLAIMER |

This report (the “Report”) is prepared by Futu Securities International (Hong Kong) Limited (“Futu Securities”). The person who retained this Report either via receiving and/or reading  (including any relevant attachment), shall agree to be bound by the terms and limitations set out below as has the right to retained this Report. Any failure to comply with these limitations may constitute a violation of the law.

This Report shall not be reproduced in whole or in part, distributed or published by you for any purpose. Futu Securities shall not be liable for any direct or consequential loss arising from any use of material contained in this Report.

The information contained in this Report has been obtained from public sources which Futu Securities has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in this Report are based on such information and are expressions of belief only.

Futu Securities has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in this Report is subject to change, and Futu Securities and/or its affiliated companies (collectively the “Futu Group”) shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will Futu Securities be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages.

Any opinions, forecasts, assumptions, estimates, valuations and prices contained in this Report are as of the date indicated and are subject to change at any time without prior notice.

This Report is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. This Report should not and does not constitute an offer, solicitation, invitation, recommendation for buying or selling of investment products or as basis on making any investment decision, or constitute as professional advice from any member of Futu Group. The products mentioned in this Report may not be suitable for all investors and a person receiving or reading this Report should seek advice from a financial adviser regarding the suitability of such products, taking into account the specific investment objectives, financial situation or particular needs of that person, before making a commitment to invest in any of such products.

This Report should not be relied upon as authoritative without further being subject to the recipient’s own independent verification and exercise of judgment. The fact that this Report has been made available constitutes neither a recommendation to enter into a particular transaction nor a representation that any product described in this Report is suitable or appropriate for the recipient. Recipients should be aware that many of the products which may be described in this Report involve significant risks and may not be suitable for all investors, and that any decision to enter into transactions involving such products should not be made unless all such risks are understood and an independent determination has been made that such transactions would be appropriate. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or a complete discussion of such risks.

This report is provided by Futu Securities, which is regulated by the Securities and Futures Commission of Hong Kong (SFC) in Hong Kong. If you have any questions about the Futu Securities Research Report, please contact Futu Securities. The CE number of SFC held by the author has been disclosed next to the author's name on the front page of the Report.

Nothing in this Report shall be construed to be an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in this research should take into account existing public information, including any registered prospectus in respect of such security.

The Relevant Report does not have regard to any individual-specific investment objectives or financial situation. Individual investors should seek professional advice from an independent financial adviser, and refer to the relevant offering documents and/or other latest published information on the ETF including the risk factors regarding the suitability of specific investment products.

Information in the Relevant Report has been obtained or derived from sources generally available to the public and believed by the analyst(s) to be reliable.

All investments carry risks, and it is possible to lose the entire investment amount. Any past performances, projections, forecasts or simulation of results are not necessarily indicative of the future performance of any investments.

The ETF has not been and will not be authorised by the SFC under section 104 of the SFO. The Relevant Report does not constitute an advertisement, invitation or document which is or contains an invitation to the Hong Kong public to acquire an interest in or participate in a collective investment scheme under section 103 of the SFO.

| Certification |

Analyst(s) certified that (i) the views expressed in this Report accurately reflect his/her personal views on the listed corporation in this Report; and (ii) no part of his/her compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this Report.

Analyst(s) certified that he/she and/or his/her associate did not deal in or trade the listed corporation or its relevant securities within the 30 days prior to and 3 business days after the issue of this Report.

| Disclosure of Interest |

Analyst Disclosure: Neither the analyst(s) preparing this Report nor his/her associate has any financial interest in or serves as an officer of the listed corporation covered in this Report.

Firm’s Disclosure: Futu Securities does not have any investment banking relationship with the listed corporation covered in this Report in the past 12 months nor any financial interest of 1% or more of the market capitalization in the listed corporation. In addition, no executive staff of Futu Securities serves as an officer of the listed corporation.

| Availability |

The information, tools and material presented herein are not directed, intended for distribution to or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to the applicable law or regulation or which would subject Futu Securities to any registration or licensing or other requirement, or penalty for contravention of such requirements within such jurisdiction.

Information contained herein is based on sources that Futu Securities believed to be accurate. Futu Group and/or relevant personnel (i.e., employees of Futu Group) may have positions and transactions in relevant investment products. Futu Group and/or relevant personnel does not bear responsibility for any loss suffered by the investor from the use of or reliance on the information set out in this report.

For details of different product's risks, please visit the Risk Disclosures Statement on http://www.futuhk.com.

This Report is written in Chinese and English, and the two versions are equally valid. If there is any contradiction between the two versions, the English version shall prevail.


Recommended