Are these the best emerging markets ETFs on the ASX? [2023]

Top 10 ASX emerging markets ETFs

Data as of 5 September 2023 for share price and returns, AUM and expense ratio as at 31 July 2023. Source: ASX and ASX Investment Products - July 2023.

*The list of funds mentioned is ranked by assets under management (AUM). When deciding what ETFs to feature, we analyse the financials, recent news, the state of the industry, and whether or not they are actively traded on Stake.

List of emerging markets exchange-traded funds to watch

1. iShares MSCI Emerging Markets ETF ($IEM)

Assets under management (AUM): $901.69m

ETF price (as of 05/09/2023): $61.47

Stake Platform Bought / Sold (1 Jan 2023 - 05 Sep 2023): 41% / 59%

The iShares MSCI Emerging Markets Index is the largest ETF focused on stock markets in developing nations by AUM on the ASX. It tracks the performance of the underlying MSCI Emerging Markets Index, which follows the equity market performance of more than 1,400 large and medium-sized companies by market cap from 24 countries. 

The greatest exposure by location is 30.47% in China, Taiwan 14.67% and then India at 14.11% as of the end of July 2023. The top sectors at this time were financials at 21.57%, information technology at 20.12% and consumer discretionary at 14.11%. The top holdings include major tech companies such as Taiwan Semiconductor Manufacturing Co ($TSM), Tencent Holdings ($TCEHY) and Samsung. 

🆚 Compare ETFs in our comparison tool: IEM vs VGE→

2. iShares Asia 50 ETF ($IAA)

Assets under management (AUM): $752.99m

ETF price (as of 05/09/2023): $91.75

Stake Platform Bought / Sold (1 Jan 2023 - 05 Sep 2023): 43% / 57%

The iShares Asia 50 ETF provides exposure to the 50 largest firms by market cap listed in Hong Kong, South Korea, Singapore or Taiwan. These businesses can also be from China. While this ETF includes developed markets, such as Singapore, it contains many similar holdings to emerging market ETFs. Around 39.4% of shares in China, 23.9% in South Korea and 21.55 in Taiwan.

South Korea is actually classified as an emerging market by some index makers, including MSCI, due to accessibility issues for investors. MSCI only actually considers 23 countries as developed markets, with others falling into standalone or frontier markets categories. A similar offering that includes Indian firms is the Vanguard FTSE Asia Ex-Japan Shares Index ETF ($VAE).

3. Vanguard FTSE Emerging Markets Shares ETF ($VGE)

Assets under management (AUM): $746.51m

ETF price (as of 05/09/2023): $70.50

Stake Platform Bought / Sold (1 Jan 2023 - 05 Sep 2023): 27% / 73%

The Vanguard FTSE Emerging Markets Shares ETF tracks the performance of over 5,000 underlying holdings in the FTSE Emerging Markets All Cap China A Inclusion Index. Its sector exposures and major firms are similar to those of $IEM. They also include companies like Alibaba ($BABA) and Reliance Industries.

India is the nation with the second largest exposure after China at 17.8% at the end of July 2023, edging ahead of Taiwan at 17.5%. Brazil and Saudi Arabia also make up the top five. This ETF has slightly lower fees than $IEM, with 0.48% compared to 0.69%. The total returns of the latter have been higher over the past five years, but this trend is no guarantee of future performance.

4. iShares China Large-Cap ETF ($IZZ)

Assets under management (AUM): $334.58m

ETF price (as of 05/09/2023): $43.61

Stake Platform Bought / Sold (1 Jan 2023 - 05 Sep 2023): 28% / 72%

The iShares China Large-Cap ETF’s underlying index consists of the 50 largest Chinese firms by market cap and liquidity trading on the Hong Kong Stock Exchange. The city has traditionally been a base for international fundraising for these businesses. Despite news of a slowing Chinese economy, the price and yield performance of the ETF has been higher over the last year compared to five years at a record date of 31 July 2023. 

These investment results could change for this emerging markets ETF if the economy remains sluggish as consumer discretionary is the largest sector with 35.45% of securities. Alibaba ($BABA), Meituan and Tencent Holdings ($TCEHY) are among the top holdings. Investors need to consider that the ETF’s ten securities accounted for 58.12% of the total underlying securities. The VanEck China New Economy ETF ($CNEW) gives access to a broader range of Chinese firms.

5. Fidelity Global Emerging Markets Fund (Managed Fund) ($FEMX)

Assets under management (AUM): $221.11m

ETF price (as of 05/09/2023): $6.20

Stake Platform Bought / Sold (1 Jan 2023 - 05 Sep 2023): 86% / 14%

The Fidelity Global Emerging Markets Fund is a managed fund that usually holds a concentrated portfolio of between 30 to 50 companies. Fidelity looks for firms that have good track records for corporate governance for this ETF. The financial product aims to generate returns in excess of the MSCI Emerging Markets Index NR in a medium to long-term timeframe.

The fund was started in 2018 and has fees of 0.99%, managed products tend to have higher costs than general index tracking ETFs. There’s a maximum 8% allocation to any one stock component and at the end of July 2023, Taiwan Semiconductor Manufacturing Co ($TSM) was at this limit. Other major holdings are HDFC Bank ($HDB) and China Mengniu Dairy.

6. VanEck Vectors Emerging Income Opportunities Active ETF (Managed Fund) ($EBND)

Assets under management (AUM): $153.34m

ETF price (as of 05/09/2023): $10.00

Stake Platform Bought / Sold (1 Jan 2023 - 05 Sep 2023): 40% / 60%

The VanEck Vectors Emerging Income Opportunities Active ETF provides investors with a global portfolio of bonds and currencies from emerging markets. The benchmark is a blended index consisting of 50% J.P. Morgan Government Bond-Emerging Market Index Global Diversified and of 50% J.P. Morgan Emerging Market Bond Index Global Diversified Hedged AUD. 

The majority of funds are kept in government bonds, which account for 72.8% of its holdings at 31 July 2023. Utility and materials companies are another top choices for bond investment. At this point, the portfolio’s yield to maturity is 8.39% and the average maturity of holdings is 10.08 years. On average emerging markets tend to have higher interest rates than developed markets to account for the greater perceived risk for those lending money to these places. The top countries by holdings are Mexico at 8.2%, South Africa at 7.3% and 6.1% for Indonesia.

7. BetaShares Martin Currie Emerging Markets Fund ($EMMG)

Assets under management (AUM): $124.83m

ETF price (as of 05/09/2023): $5.87

Stake Platform Bought / Sold (1 Jan 2023 - 05 Sep 2023): 31% / 69%

The BetaShares Martin Currie Emerging Markets Fund has an actively managed portfolio of shares and is managed by Martin Currie as a member of the Franklin Templeton Group. The investment team aims to outperform the MSCI Emerging Markets Index over rolling five-year periods, in Australian Dollars. The fee of 1.00% is the highest amongst this group of ETFs. 

As of 31 July 2023, just over one quarter was allocated to China, 17.5% to India and 16.8% to South Korean firms. Similar to other ETFs in this list, information technology is a leading sector and was responsible for 28.2% of holdings. It was followed by financials and consumer discretionary firms. AIA Group, Alibaba ($BABA), HDFC Bank ($HDB) were the top companies at this date.

8. BetaShares India Quality ETF ($IIND)

Assets under management (AUM): $83.92m

ETF price (as of 05/09/2023): $10.83

Stake Platform Bought / Sold (1 Jan 2023 - 05 Sep 2023): 66% / 34%

The BetaShares India Quality ETF provides access to 30 firms selected due to their combined rankings across a number of factors. These measures include high profitability, low leverage and high earnings stability, although there are no guarantees that the stocks will fulfil these criteria at all times. Major sectors are information technology at 21.55%, financials at 17.2% and consumer staples at 16.8% of the total holdings.

Top firms in the ETF include Tata Consultancy Services, Infosys and Kotak Mahindra Bank. There is increased interest in the world’s most populous nation and many expect the economy to grow rapidly in the coming years. Another option is investing in the Global X India Nifty 50 ETF ($NDIA) also gives access to the nation, which provides access to the 50 largest businesses by market cap in India.

9. Vaneck MSCI Multifactor Emerging Markets Equity ETF ($EMKT)

Assets under management (AUM): $56.68m

ETF price (as of 05/09/2023): $21.62

Stake Platform Bought / Sold (1 Jan 2023 - 05 Sep 2023): 95% / 5%

The Vaneck MSCI Multifactor Emerging Markets Equity ETF holds a portfolio of publicly traded securities from emerging markets. The underlying index is the MSCI Emerging Markets Multi-Factor Select Index, which selects shares from the main MSCI Emerging Markets Index based on four factors that measure equity market performance. These are a value-based score based on the price-earnings and price book ratios, momentum of the share price outperforming the market in the past two years, low size and quality.

The quality rating depends on the return on equity, stable annual earnings growth, low levels of borrowing, earnings and investment quality. Information technology is the top sector with 26.4% of holdings, followed by financials at 15.7% and industrials at 9.8%. Geographic exposure to China is the highest at 30.7% and Taiwan Semiconductor Manufacturing Co ($TSM) was the largest shareholding at the end of July 2023.

🆚 Compare ETFs in our comparison tool: EMKT vs IAA→

10. iShares J.P.Morgan USD Emerging Markets Bond (AUD Hedged) ETF ($IHEB)

Assets under management (AUM): $50.27m

ETF price (as of 05/09/2023): $73.07

Stake Platform Bought / Sold (1 Jan 2023 - 05 Sep 2023): 66% / 34%

The iShares J.P.Morgan USD Emerging Markets Bond (AUD Hedged) ETF provides exposure to U.S. dollar-denominated bonds issued by government and semi-government entities. The product is hedged into Australian Dollars, which means changes in the exchange rate will not affect the overall returns. There are both fixed and floating-rate bonds in the financial product.

As of 31 July 2023, geographic allocation to Mexico was the greatest with 5.7% of holdings, followed by Saudi Arabia at 5.4% and Indonesia at 5.0%. The average yield was 6.99% and the duration was 12.4 years, with 26.6% of bonds only maturing in over 20 years. The most common credit rating was BBB, with this category of creditworthiness accounting for 27.0% of all underlying holdings.

How to invest in emerging markets ETFs?

Want to start investing in emerging markets but not sure how? Choose an investment platform then follow the steps below.

1. Look for an online investing platform

You can sign up with an investment platform that gives you access to the ASX and allows you to buy shares. Stake is one of a number of share investing platforms in Australia.

2. Fund your account

Complete the platform’s account application, which will require some of your personal and financial details. The investment account can be funded with a bank transfer, debit card or even Apple/Google Pay.

3. Search for an ETF

Find the ETF by company name or ticker symbol. Do your own research to ensure it is the right investment product for your own circumstances.

4. Choose an order type and buy the ETF

Buy on any trading day with a market order or use a limit order to delay your purchase of the selected ETF shares until it reaches your desired stock price. Look into dollar cost averaging to spread out your risk, which smooths out buying at consistent intervals.

5. Monitor your investment

Optimise your portfolio by tracking how your stock and the business perform with an eye on the long term. You may be eligible for dividends and shareholder voting rights that affect your stock.

What is the best-performing emerging markets ETF in Australia?

The iShares MSCI Emerging Markets ETF ($IEM) has the highest 1-year total return of 20.68% and 5-year figure of 5.54% amongst this list of ASX emerging market ETFs at the end of July 2023. The group has several newer financial products, which do not yet have performance figures for the longer term. The trends in the past performance of one ETF might also not continue into the future and the top ETF by this measure is likely to change at various points in time.

What are the benefits of investing in emerging markets?

Emerging markets are generally considered to be countries or regions undergoing high rates of economic growth. These rates tend to be faster than those of developed markets, which also usually have older populations and more established financial markets on average. Globalisation has opened up trade to various regions, but popular routes have shifted over time and levels of activity between emerging economies themselves are also growing.

Investors could diversify their portfolios with multiple asset classes by allocating a proportion to emerging markets. ASX ETFs have several options relating to Asia, whereas other regions such as Latin America, Africa, Eastern Europe and Central Asia have lower levels of representation in these ETFs. Many emerging market ETF products also have a high exposure to China in the underlying index, so a few specific countries might have an impact on the overall returns.

More resources:

✅ Are these the best ETFs to invest in?→

✅ List of high dividend ETFs available in Australia→

✅ Which Vanguard ETFs to buy?→

Emerging markets ETFs FAQs

This does not constitute financial product advice nor a recommendation to invest, it is for informational purposes only. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking appropriate financial or taxation advice from a licensed adviser before investing.