Emerging Markets ETF Battered by China Woes to Start 2024

Senior ETF Analyst

Jan 22, 2024

Reviewed by: Ron Day

Edited by: James Rubin

The iShares MSCI Emerging Markets ETF (EEM) is off to a rough 2024, losing nearly 5%, mainly due to goings on in China.

EEM allocates a quarter of its portfolio to China and another 16% to Taiwan, or more than 40% between them.

While investors might be surprised to find that China makes up such a large share of EEM, such an allocation isn't unusual among broad emerging markets funds.

The largest ETF in the space, the $75 billion Vanguard Emerging Markets Stock Index Fund ETF (VWO) has an even greater percentage of its portfolio in China—28%—and another 19% in Taiwan. That’s almost half of its portfolio between the two.

For investors who are nervous about such hefty allocations to China at a time of elevated geopolitical and economic risks related to the country, something like the iShares MSCI Emerging Markets ex China ETF (EMXC) might make sense.

EMXC Fares Better

EMXC is a broad emerging markets ETF that excludes Chinese stocks, a strategy that’s led to a 2.5% loss this year—or half the loss of EEM.

Over the past year, the outperformance is more stark: EMXC is up 9% versus a 4% decline for EEM. It’s the same story over the past five years: EMXC is up 27% versus a 5% gain for EEM.

EMXC currently has India as its top country, with a 24% allocation to that country. And though it excludes mainland China stocks, it still holds stocks from Taiwan and allocates a chunky 21% of its portfolio to stocks from the island.

Rounding out the top five countries for EMXC are Korea, Brazil and Saudi Arabia, with weightings of 16%, 8% and 6%, respectively.

Sumit Roy

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Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.

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