ETFs in an Emerging Market: 5 Best ETFs To Buy

In this article, we discuss 5 best emerging market ETFs to buy. If you want to read our discussion on emerging market economic outlook, head over ETFs in an Emerging Market: 10 Best ETFs To Buy. 

5. Xtrackers Emerging Markets Carbon Reduction and Climate Improvers ETF (NYSE:EMCR)

5-Year Share Price Returns as of March 12, 2024: 23.33%

Xtrackers Emerging Markets Carbon Reduction and Climate Improvers ETF (NYSE:EMCR) consists of large and mid-cap companies from emerging markets, selected based on meeting specific environmental, social, and governance (ESG) criteria or having committed to reducing greenhouse gas emissions. Typically, at least 80% of the fund’s net assets are invested in equity securities of emerging market issuers. As of March 12, 2024, the fund holds net assets worth $604.26 million. It is one of the best emerging market ETFs to buy. 

Infosys Limited (NYSE:INFY) is one of the top holdings of Xtrackers Emerging Markets Carbon Reduction and Climate Improvers ETF (NYSE:EMCR). Infosys Limited (NYSE:INFY) is a Mumbai-based company that offers consulting, technology, outsourcing, and digital services globally, including North America, Europe, and India. 

According to Insider Monkey’s fourth quarter database, 22 hedge funds were long Infosys Limited (NYSE:INFY), compared to 19 funds in the prior quarter. Ken Fisher’s Fisher Asset Management is the biggest stakeholder of the company, with 15.3 million shares worth $281.2 million. 

4. Avantis Emerging Markets Equity ETF (NYSE:AVEM)

5-Year Share Price Returns as of March 12, 2024: 29.58%

Avantis Emerging Markets Equity ETF (NYSE:AVEM) ranks 4th on our list of the best emerging market ETFs to buy. Avantis Emerging Markets Equity ETF (NYSE:AVEM) invests in a diverse range of companies across emerging markets, spanning different market capitalizations. Established on September 17, 2019, the fund holds net assets totaling $5 billion as of March 11, 2024. Avantis Emerging Markets Equity ETF (NYSE:AVEM)’s portfolio comprises 3,521 stocks, with a net expense ratio of 0.33%.

PDD Holdings Inc. (NASDAQ:PDD) is one of the top holdings of Avantis Emerging Markets Equity ETF (NYSE:AVEM). PDD Holdings Inc. (NASDAQ:PDD) is a multinational commerce group and its flagship platform, Pinduoduo, is an e-commerce platform offering a wide range of products. The company also operates Temu, another online marketplace. Jefferies Financial upgraded PDD Holdings Inc. (NASDAQ:PDD) shares to Buy on March 11, anticipating significant growth in fourth-quarter revenue, with a projected 16% quarterly and 101% yearly increase to RMB80 billion. Jefferies also raised the price target for PDD shares to $157 from $117, reflecting their optimistic outlook.

According to Insider Monkey’s fourth quarter database, 71 hedge funds were bullish on PDD Holdings Inc. (NASDAQ:PDD), compared to 66 funds in the prior quarter. Lei Zhang’s Hillhouse Capital Management is the largest stakeholder of the company, with 10.1 million shares worth nearly $1.5 billion. 

Baron Emerging Markets Fund stated the following regarding PDD Holdings Inc. (NASDAQ:PDD) in its fourth quarter 2023 investor letter:

“We added to our digitization theme by building a position in PDD Holdings Inc. (NASDAQ:PDD), a leading Chinese e-commerce platform. Founded in 2015, the company has emerged as China’s second largest e-commerce player, capturing approximately 20% market share. In our view, PDD’s competitive moat lies in its team purchase model that facilitates bulk buying through direct partnerships with manufacturers, thereby eliminating intermediaries (e.g., distributors and middlemen) and lowering costs. Key factors driving the company’s meteoric growth include rising consumer demand for affordable products in China amid an economic slowdown, small-scale merchants seeking alternatives to Alibaba, and superior management execution. PDD’s revenue growth outpaces gross merchandize value growth owing to rising take rates as merchants aggressively compete for consumer traffic on the platform. In our view, PDD should continue to gain market share given its dominance in the value-for-money segment, growing affordable branded product offerings, and high operational efficiency. We believe the company’s growth will be further supported by the recent launch of its international e-commerce platform, Temu, which has become one of the fastest growing apps globally. Leveraging China’s excess manufacturing capacity, Temu has strong negotiating power with domestic suppliers and attracts global consumers with competitively priced products. Temu’s recent initiatives to improve unit economics, coupled with achieving variable break even in the sizable U.S. market, showcase management’s skill and commitment to sustained growth. We expect PDD to at least double its earnings and free cash flow in the next three years, with the potential for continued compounding thereafter.”

3. WisdomTree Emerging Markets High Dividend Fund (NYSE:DEM)

5-Year Share Price Returns as of March 12, 2024: 29.88%

WisdomTree Emerging Markets High Dividend Fund (NYSE:DEM) ranks 3rd on our list of the best emerging market ETFs. WisdomTree Emerging Markets High Dividend Fund (NYSE:DEM) aims to mirror the performance of high dividend yielding companies in emerging markets. As of March 12, 2024, the fund holds net assets worth $2.8 billion, with an expense ratio of 0.63%. It offers a distribution yield of 2.99% and a 30-day SEC yield of 6.03%. WisdomTree Emerging Markets High Dividend Fund (NYSE:DEM) was established on July 13, 2007. 

Vale S.A. (NYSE:VALE) is one of the top holdings of WisdomTree Emerging Markets High Dividend Fund (NYSE:DEM). Vale S.A. (NYSE:VALE) is primarily engaged in the production and sale of iron ore and iron ore pellets for steelmaking purposes globally. On March 11, Vale S.A. (NYSE:VALE) declared a $0.5519 per share semi-annual dividend. The dividend is payable on March 26, to shareholders on record as of March 13. 

According to Insider Monkey’s fourth quarter database, 34 hedge funds were bullish on Vale S.A. (NYSE:VALE), same as the prior quarter. 

Miller Value Partners Income Strategy made the following comment about Vale S.A. (NYSE:VALE) in its second quarter 2023 investor letter:

“Vale S.A. (NYSE:VALE) fell during the quarter with iron ore prices. The company reported 1Q23 revenue of $8.44B, -22.7% Y/Y, below consensus of $8.79B, and Adjusted EBITDA of $3.69B, compared to 1Q22 EBITDA of $6.55B, below consensus of $4.49B. The Brazilian miner produced 66.8 million tons (Mt) of iron ore in 1Q23, +5.8% Y/Y, below consensus of 67.7 Mt, 67.0 thousand tons (kt) of copper, +18.4% Y/Y, and 41.0 kt of nickel, -10.5% Y/Y. Although management reaffirmed its FY23 production guidance, analysts seemed to be concerned by the negatively offsetting impacts of weaker iron ore prices as China, the world’s largest iron ore buyer, has threatened to curb any “unreasonable” price gains for the metal in an effort to prevent this year’s steel output from exceeding 2022 levels. Vale generated 1Q23 free cash flow (FCF) of $2.28B, bringing trailing-twelve month (TTM) FCF to $6.73B, or a FCF yield of 11.3%. The company repurchased $763MM worth of shares in the quarter and paid $1.80B in dividends, bringing total capital returned to shareholders in the quarter to $2.56B, or 4.3% of the company’s market cap.”

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

5-Year Share Price Returns as of March 12, 2024: 32.82%

iShares MSCI Emerging Markets ex China ETF (NASDAQ:EMXC) is one of the best emerging market ETFs to buy. iShares MSCI Emerging Markets ex China ETF (NASDAQ:EMXC) aims to mirror the performance of the MSCI Emerging Markets ex China Index, composed of large and mid-cap emerging market equities, excluding China. As of March 12, 2024, the ETF holds net assets worth $11.2 billion, with a portfolio comprising 702 stocks and an expense ratio of 0.25%. iShares MSCI Emerging Markets ex China ETF (NASDAQ:EMXC) was launched on July 18, 2017. 

ICICI Bank Limited (NYSE:IBN) is one of the top holdings of iShares MSCI Emerging Markets ex China ETF (NASDAQ:EMXC). ICICI Bank Limited (NYSE:IBN) provides a wide range of banking products and services both in India and internationally. Its operations are divided into Retail Banking, Wholesale Banking, Treasury, Other Banking, Life Insurance, and Others segments. 

According to Insider Monkey’s fourth quarter database, 34 hedge funds were bullish on ICICI Bank Limited (NYSE:IBN), compared to 32 funds in the last quarter. Rajiv Jain’s GQG Partners is the largest stakeholder of the company, with 58 million shares worth $1.38 billion. 

1. WisdomTree Emerging Markets SmallCap Dividend Fund (NYSE:DGS)

5-Year Share Price Returns as of March 12, 2024: 36.06%

WisdomTree Emerging Markets SmallCap Dividend Fund (NYSE:DGS) ranks 1st on our list of the best emerging market ETFs to buy. WisdomTree Emerging Markets SmallCap Dividend Fund (NYSE:DGS) aims to mirror the performance of dividend-paying small-cap companies in emerging markets. As of March 12, 2024, WisdomTree Emerging Markets SmallCap Dividend Fund (NYSE:DGS) holds total assets worth $2.86 billion, with an expense ratio of 0.58%. It boasts a distribution yield of 3.56% and a 30-day SEC yield of 3.91%. The ETF was launched on October 30, 2007.

Chicony Electronics Co., Ltd. (2385.TW) is the largest holding of WisdomTree Emerging Markets SmallCap Dividend Fund (NYSE:DGS). Chicony Electronics Co., Ltd. (2385.TW) is a Taiwanese company that manufactures and sells electronic parts and components globally. Their products include input devices like keyboards, mobile keyboards, and camera modules, as well as video image products such as action cams and dash cams.

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