ETF News

European equities have had a strong year so far, and while that’s been widely covered, emerging markets equities have also shown solid performance. Looking at year-to-date returns, the MSCI Emerging Markets Total Return Index hasn’t kept pace with the MSCI Europe Index, but it has clearly outperformed the MSCI USA Index.

Korea’s Surprise Rally

While strong performance from China and Taiwan in the MSCI Emerging Markets Equity index was expected, South Korea’s outperformance has come as a surprise. A key driver behind this strength is new legislation aimed at improving corporate governance. The reforms include holding board members accountable to all shareholders and placing limits on the voting power of dominant shareholders.

These changes are part of a broader push by South Korea’s new government to make local equities more attractive to long-term investors and address the so-called "Korea Discount"—the tendency for Korean stocks to trade at lower valuations than their global peers. The reforms mark a win for President Lee Jae Myung, who has made governance improvements a top priority.

Emerging Markets: Quietly Powering Global Growth

The OECD’s Economic Outlook, Volume 2025, Issue 1, highlights that China is experiencing slow but steady growth, supported by fiscal stimulus, monetary easing, and strong export activity. Other emerging markets are also expanding, with India, Indonesia, Chile, and Colombia seeing continued momentum. In Mexico, output growth improved as agricultural production recovered from late 2024 weather disruptions.

Although uncertainty around U.S. trade policy remains a headwind for global growth, emerging market economies could become a key driver at this turning point.

Investing in Emerging Markets ETFs

For Canadian investors looking to gain exposure to emerging market equities, several ETFs offer convenient access. Some follow broad strategies, while others take a more focused or sustainable approach:

RBC Emerging Markets Dividend Fund (Ticker: REMD)

REMD invests in companies across emerging markets that offer attractive valuations and higher-than-average dividend yields. The fund relies on fundamental research, while also considering quantitative and technical signals. It is diversified by sector and region and carefully monitors economic trends across markets.

iShares Emerging Markets Fundamental Index ETF (Ticker: CWO)

CWO tracks the FTSE RAFI Emerging Markets Index, which includes 350 companies selected based on strong fundamentals. These are weighted using a mix of financial indicators such as dividends, cash flow, sales, and book value, offering a rules-based approach to capturing emerging market potential.

Desjardins RI Emerging Markets Multifactor - Net-Zero Emissions Pathway ETF (Ticker: DRFE)

DRFE uses an active, multifactor strategy to invest in large and mid-cap companies from emerging markets. The fund aims to reduce portfolio emissions over time while keeping risk in check. All holdings meet strict ESG criteria, appealing to investors focused on long-term sustainability.

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.