Is It The Right Time To Buy Emerging Market ETFs For 2020?

Emerging markets are increasingly gaining popularity among investors. These markets are believed to have added wealth of about $11 trillion to investor portfolios over the past 10 years. In fact, a Bloomberg’s survey of 57 global investors, strategists and traders discussing their viewpoint for 2020 revealed that developing-nation assets are expected to outperform their developed counterparts. Asian economies are expected to deliver the best performance. Currently, total investment in emerging-market stocks and bonds surpasses $25 trillion, exceeding the combined economies of the United States and Germany (read: Emerging Market ETFs Beating the Broader Market: Here's How).

The Sino-U.S. trade war is expected to be a major driver of emerging market investments in 2020, followed by China’s growth forecast. Although currently all major global banks are keeping interest rates steady, their easier monetary policies earlier have lent huge support to the emerging markets. In fact, central banks in South Korea, Indonesia, India, Turkey and South Africa opted for rate cuts in the third quarter in order to keep signs of a slowdown at bay. In October too, countries like Brazil, India and Russia took the policy easing route by cutting rates (read: Emerging Market Debt ETFs Top Equities in Q3).

Interestingly, in the Bloomberg’s survey, Asia was the most favored among investors for currencies and stocks along with Latin America for bonds.

Also, emerging markets have been gaining investors’ confidence due to their high growth potential and rapid pace of industrialization. Per IMF projections, growth in advanced economies will slow to 1.7% in 2019 and 2020, while emerging market and developing economies will experience growth of 3.9% in 2019 and 4.6% in 2020. Resultantly, per data provided by Bloomberg, total equity value of 26 developing markets listed by the MSCI Inc. has risen $6.6 trillion since 2009-end.

Emerging Market ETFs in Focus

Below we highlight some of the emerging market ETFs that can be considered by investors:

Vanguard FTSE Emerging Markets ETF VWO

The fund tracks the FTSE Emerging Markets All Cap China A Inclusion Index. It invests in stocks of companies located in emerging markets around the world, such as China, Brazil, Taiwan, and South Africa. The fund holds a basket of 5,074 holdings and an AUM of $63.91 billion. It has an expense ratio of 12 basis points. It has gained 11.3% in the year-to-date period (read: Is It the Right Time to Try Riskier ETFs?).

iShares Core MSCI Emerging Markets ETF IEMG

The fund tracks the MSCI Emerging Markets Investable Market Index. It provides exposure to a broad range of emerging market companies. The fund holds a basket of 2,503 holdings. It has an expense ratio of 14 basis points and an AUM of $57.74 billion. It has gained 9.4% in the year-to-date period.

iShares MSCI Emerging Markets ETF (NYSE:EEM) EEM

The fund tracks the MSCI Emerging Markets Index. It provides exposure to large and mid-sized companies in emerging markets. The fund holds a basket of 1,224 holdings. It has an expense ratio of 67 basis points and an AUM of $27.22 billion. It has gained 9.9% in the year-to-date period (read: Follow Morgan Stanley (NYSE:MS) to Trade 2020 Election With ETFs).

Schwab Emerging Markets Equity ETF (NS:SCHE)

The fund tracks as closely as possible, before fees and expenses, the total return of the FTSE Emerging Index and provides exposure to large and mid-cap companies in emerging countries. The fund holds a basket of 1,340 holdings. It has an expense ratio of 13 basis points and an AUM of $6.48 billion. It has gained 12.7% year to date.

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