Emerging Markets Rally: Which ETFs Are Standing Out
Emerging market ETFs are surging in 2025, powered by a weaker dollar, Fed easing expectations, and strong equity performance in Korea, Taiwan, and China.
While the year-to-date performance of hard assets like gold and silver has been headline news, another asset class – emerging market equities – has been quietly experiencing a breakout year. Year-to-date, the MSCI Emerging Markets Index has returned nearly 30%, a figure that stands out when compared to other calendar periods.
Factors Driving Performance
The current macroeconomic environment is serving as a catalyst for emerging market equity performance. Firstly, with the U.S. Federal Reserve poised to lower rates further this year, this is creating room for additional monetary easing and stronger growth across several emerging market economies. Another factor is the weakening of the U.S. dollar, which has noticeably declined this year, as evidenced by the U.S. Dollar Index (DXY). A weakening dollar can boost flows into emerging market equities as investors seek higher returns outside the US.
Looking at the equity market performance of the predominant economies that comprise the MSCI Emerging Markets Index, Korea, Taiwan, and China have delivered truly outstanding returns. In the case of Korea, recent corporate governance reforms to improve transparency and shareholder rights have been a boon. Regarding China, the nation’s fiscal reforms and technological advancements have bolstered equity market performance.
Conversely, Indian equities have underperformed other emerging markets this year. High valuations, higher-than-expected tariffs, and uncertainty caused by the recent policy change on H1-B visas and their potential ripple effects have had a material impact on equity performance.
Investing in Emerging Equities
For Canadian investors interested in gaining turnkey market exposure to emerging market equities, the RBC Emerging Markets Dividend Fund ETF (Ticker: REMD), BMO MSCI Emerging Markets Index ETF (Ticker: ZEM), and Scotia Emerging Markets Equity Index Tracker ETF (Ticker: SITE) are worth considering.
REMD is an actively managed solution that provides exposure to companies trading at attractive valuations and with above-average dividend yields that are located in or active in emerging markets.
ZEM is designed to replicate the performance of the MSCI Emerging Markets Index, which captures large and mid-cap representation across 26 Emerging Markets countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.
SITE seeks to replicate the performance of the Solactive GBS Emerging Markets Large & Mid Cap Index, which tracks the investment returns of publicly traded securities issued by large and mid capitalization companies in the emerging markets.
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.
