Investors Love This Under the Radar Emerging Markets ETF

EMXC has seen inflows of nearly $4 billion this year.

sumit
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Senior ETF Analyst
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Reviewed by: Kent Thune
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Edited by: James Rubin

The iShares MSCI Emerging Markets ex China ETF (EMXC) has quietly become one of the largest emerging markets exchange-traded funds.

This year, investors have pushed $3.8 billion into the ETF, the largest inflows for any emerging markets ETF by far.

That’s taken the fund’s assets under management to $12.5 billion, making it the fourth-largest U.S.-listed EM exchange-traded fund after the $74 billion iShares Core MSCI Emerging Markets ETF (IEMG), the $73.7 billion Vanguard FTSE Emerging Markets ETF (VWO) and the $16.6 billion iShares MSCI Emerging Markets ETF (EEM).  

EMXC’s growth suggests that investors are interested in putting money to work in emerging markets stocks, but they don’t want to deal with the risks of China.  

EMXC tracks the MSCI Emerging Markets ex China Index, giving it a much different look than broader EM funds like IEMG and VWO.

For instance, IEMG has 23% of its portfolio allocated to China, while EMXC has no positions in Chinese stocks.

Instead, EMXC’s largest geography is India, with a 25% weighting, followed by Taiwan, with 23%, and Korea, with 16%.

For IEMG, India, Taiwan and Korea have smaller weightings of 19%, 18%, and 22%, respectively.

EMXC Growing as China Faces Economic Downturn

EMXC’s growing popularity reflects the angst investors have about China. Once a darling among investors, China is now grappling with an economic downturn, a declining population, and geopolitical tensions with the West.  

A perception that the Chinese government is more hostile to big businesses has also weighed on sentiment.

There is the possibility that investors are abandoning China at precisely the wrong moment.  With sentiment so negative, perhaps Chinese stocks are at or close to their lows.  

Only time will tell.  

But even if that’s the case, investors need to be able to sleep comfortably. And if buying emerging markets without exposure to China helps them do that, then there’s nothing wrong with that. 

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.