Asia

Emergin’ Into This Emerging Markets Fund

It seems that no matter which financial media source you consult, all the news regarding emerging markets center around issues in the Chinese economy.

There is, of course, good reasons for this. ABC News reported that an important real estate developer in China — Country Garden — failed to meet a scheduled debt payment, causing a cascading effect on global markets. Everywhere one looked, one saw the same question: How shaky is the Chinese economy, where real estate is a primary driver of the economic boom there — albeit one built on a great deal of debt?

After all, such a problem in the Chinese real estate market is not new. In 2021, financial problems and an eventual default by Evergrande caused a slide in global markets that was only arrested when Chinese officials said the crisis was contained and credit markets would continue as normal. This new default in the Chinese real estate sector has proved that there are problems in the Chinese economy — problems that will likely remain present into the near future.

Other emerging markets, according to the Globe and Mail, are doing much better than China. For instance, when we look at the MSCI Emerging Markets Index (which includes China), we see a rise of 11.4% by the end of July. When China is removed from the index, and we look at the MSCI EM Ex-China Index, we see a rise of 14.6% over the same time.

As a result, some emerging-market investors are turning away from China and toward Taiwan and South Korea — two countries that are also benefitting from the artificial intelligence (AI) wave that is sweeping the American tech sector. Still others have turned to Europe, especially Greece, largely due to the recent electoral victory of a pro-business government.

For investors who want to enter the world of emerging markets but who want to steer clear of the Chinese economy for the time being, the Columbia EM Core ex-China ETF (NYSEARCA: XCEM) might appeal to them. This fund tracks an index of emerging market companies that are not in either mainland China or Hong Kong. The portfolio is built through a market-cap-weighting strategy that selects the largest 700 companies by market capitalization.

Top holdings in this portfolio include Taiwan Semiconductor Manufacturing Co. Ltd (NYSE: TSM), Samsung Electronics Co. Ltd. (KRX: 005930), ICICI Bank LTD ADR (NYSE: IBN), HDFC Bank LTD ADR (NYSE: HDB), International Holdings Co. PJSC (1308.HK), Infosys LTD ADR (NYSE: INFY) and Al Rajhi Banking and Investment Company (TADAWUL: 1120).

This fund is down 3.84% over the past month, up 1.85% over the past three months and up 9.63% year to date. The fund has $334.8 million in assets under management, and it has an expense ratio of 0.16%.

Source: stockcharts.com

While this fund does provide an access point to the world of emerging markets, such an ETF may not be suitable for all investors. Investors should always do their due diligence before adding any stock, ETF or fund to their portfolio to make sure it is the best choice for their investing strategy.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You may just see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.