Industry Updates

Emerging markets ETFs battered by China woes to start 2024

Big China weightings have hurt emerging market ETFs. EMXC, an EM fund focused more on India, has fared better

Sumit Roy

China markets

Emerging market ETFs are off to a rough start of the year amid ongoing challenges in China, the largest weighting.

The iShares Core MSCI EM IMI UCITS ETF (EIMI), which tracks the MSCI Emerging Markets Investable Market index, is down 4.8%, as at 23 January.

In response, Chinese authorities are currently considering a $278bn stimulus package to help its stock market performance, Bloomberg reported.

EIMI allocates a almost quarter of its portfolio to China and another 17.2% to Taiwan, just under 40% between them.

While investors might be surprised to find that China makes up such a large share of EIMI, such an allocation is not unusual among broad emerging markets funds.

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 Amundi MSCI Emerging Markets Ex China UCITS ETF (EMXC) might make sense. 

EMXC fares better

EMXC is a broad emerging markets ETF that excludes Chinese stocks, a strategy that has led to a 2.5% loss this year – or half the loss of EIMI. 

Over the past year, the outperformance is more stark: EMXC is up 9% versus a 4.3% decline for EIMI. It is the same story over the past five years: EMXC is up 27% versus a 14.8% gain for EIMI.

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.

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