ETF News

Emerging market (EM) equities performed exceptionally well in 2025, driven by China’s resilient exports, a weakening US dollar, and the economic benefits of falling commodity prices. As a result, the MSCI Emerging Markets Total Return Index returned approximately 35% in 2025, outperforming the S&P 500 Index.

2026 Market dynamics driving EM equities 

While EM equities’ 2025 performance is noteworthy, the market dynamics that underpinned it remain in place, including a favourable macro backdrop. Emerging-market central banks have largely begun reducing policy rates in late 2025, driven by easing inflation and the need to support economic growth. Rate cuts, along with the observable decline in commodity prices, will help drive emerging-market equities.

While emerging markets, excluding China, are sometimes viewed as a monolith, the asset class's diversification is essential to overall performance. Looking at the largest country weights in the MSCI Emerging Markets Index, excluding China (which accounts for approximately 25%), most have delivered compelling annual returns (except India).

The strong performance of Korea and Taiwan can be attributed to their robust technology sectors, with firms such as Taiwan Semiconductor and Hynix playing crucial roles in developing semiconductors for artificial intelligence. As such, these countries are driving innovation at a scale and speed the world cannot overlook, creating the chips, systems, and breakthroughs that will shape the global economy. While EM equities benefited from Asia’s technological strength, countries like South Africa have provided balance to the asset class, as the recent rally in precious metals has allowed the mining sector to achieve strong profitability. Regional diversification in EM equities allows the competitive strengths of other nations to also contribute to overall performance.

Investing in EM equities via ETF

For Canadian investors interested in gaining exposure to EM equities, ETF solutions such as RBC’s Emerging Markets Dividend Fund (Ticker: REMD), Global X’s MSCI Emerging Markets Index ETF (Ticker: EMMX), and AGF’s Emerging Markets ex China ETF (Ticker: AEMX) are worth considering.

REMD is an actively managed solution that provides exposure to companies trading at attractive valuations and offering above-average dividend yields, located in or active in emerging markets. The fund employs a fundamental research approach but may also consider quantitative and technical factors in executing its investment strategy.

EMMX is a passively managed solution that seeks to replicate the performance of the MSCI Emerging Markets Index, providing exposure to large and mid-sized companies across 24 emerging markets.

AEMX employs a disciplined approach focused on identifying quality companies with long-term, sustainable competitive advantages and attractive valuations. The fund uses a bottom-up approach to identify companies with significant business interests in emerging markets outside China that trade at a significant discount to their expected earnings potential. Companies are evaluated based on strong long-term earnings growth potential, excellent management teams, and relative market dominance.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision