5 Emerging Market ETFs Surging To Start 2021

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Emerging market stocks continued their year-end rally to start 2021 buoyed by a wider rollout of COVID-19 vaccines as well as Joe Biden’s victory in the U.S. presidential election.

The vaccine has set the stage for global economic recovery, thereby bolstering investors‘ confidence in riskier assets. Meanwhile, the incoming Biden presidency seems beneficial for the emerging markets. This is especially true as the administration is looking for a bigger fiscal package and infrastructure spending that would lead to increased demand for concrete and cement, energy, heavy machinery, materials, and industrial products from companies in emerging markets. Cheap money flows and lower rates across the globe added to the strength.

In fact, the MSCI Emerging Markets Index is up 80% from the March rout seen last year as these stocks have added $10.8 trillion in just over nine months, representing the fastest bout of wealth creation in the history of emerging markets. With the recent rally, emerging market stocks, which bore the brunt of all the economic and political upheavals from taper tantrum to slowing growth in China and Donald Trump’s trade war, came roaring back after 13 years of underperformance.

An impressive rally was also driven by a weak dollar against the basket of currencies that has been pulling in more capital into the emerging markets. The greenback is expected to remain under pressure given the trillions of cheap money flowing into the economy and the prospect of further easing.

While many emerging market ETFs have been soaring, we highlight five ETFs that are leading the space to start the year. These are also expected to continue outperforming, provided the fundamentals remain intact.

iShares MSCI UAE ETF (UAE - Free Report) – Up 9.1%

This fund offers exposure to a broad range of companies in the United Arab Emirates by tracking the MSCI All UAE Capped Index. It holds 32 stocks in its basket with heavy concentration on the top three firms. The ETF has accumulated $14.5 million in its base and trades in an average daily volume of 15,000 shares. It charges 59 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

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