INDA, Emerging Markets ETFs Outperforming SPY

Jul 11, 2024

Have you looked at emerging markets exchange-traded funds lately?

While investors have been captivated by the continued dominance of the mega-cap growth driven U.S. stock market, five emerging markets countries have outperformed the S&P 500 index in the past month.

The top-performing country ETF, the iShares MSCI South Africa ETF (EZA) is up more than 10% while the largest country ETF, the iShares MSCI India ETF (INDA) , has risen 5%, edging out the 4.6% gain for the SPDR S&P 500 ETF Trust (SPY) .

Other countries outperforming U.S. stocks in the past month include Taiwan, South Korea and Indonesia.

Emerging markets ETFs , in aggregate, have nearly matched the one-month S&P 500 performance with a gain of 4.4%, as measured by the iShares MSCI Emerging Markets ETF (EEM) .

The recent momentum for emerging markets comes at an interesting time for investors and advisors, as the S&P 500 is arguably overpriced at a price-earnings ratio of 29 (the historic median is about 17) while the PE on the MSCI Emerging Markets Index is 13.

With the prospects of a slowing U.S. economy and a weakening U.S. dollar in the second half of 2024, emerging markets are looking more attractive as a diversification tool.

Top Performing Emerging Markets Countries 2024

Ticker	Fund	Expense Ratio	AUM	YTD Return
TUR	iShares MSCI Turkey ETF	0.59%	$244.7M	33.51%
EPU	iShares MSCI Peru ETF	0.49%	$123.2M	24.93%
EWT	iShares MSCI Taiwan ETF	0.59%	$5.5B	21.86%
SMIN	iShares MSCI India Small-Cap ETF	0.79%	$981.8M	19.64%
ARGT	Global X MSCI Argentina ETF	0.59%	$301.0M	12.57%

Data as of July 9, 2024. Past performance is no guarantee of future results.

iShares MSCI Turkey ETF

The iShares MSCI Turkey ETF (TUR) tracks the MSCI Turkey IMI 25/50 Index, which includes both large and mid-sized companies across various sectors of the Turkish economy. Turkey's tech sector has been a standout performer this year, with strong growth from companies like the clothing retailer FLO and Pegasus Airlines.

iShares MSCI Peru ETF

The iShares MSCI Peru ETF (EPU) seeks to track the investment results of an index that provides exposure to Peruvian stocks, including companies with strong economic ties to Peru that are not listed on the Peruvian exchange. The EPU ETF is performing well in 2024 likely due to a surge in copper prices, a key Peruvian export that benefits many companies in the fund.

iShares MSCI Taiwan ETF

The iShares MSCI Taiwan ETF (EWT) seeks to track the MSCI Taiwan 25/50 Index, including large and mid-sized companies across various sectors of the Taiwanese economy. EWT’s outperformance in 2024 has been primarily driven by a rise in demand for semiconductors, a key industry within the Taiwanese economy.

iShares MSCI India Small-Cap ETF

The iShares MSCI India Small-Cap ETF (SMIN) tracks the performance of the MSCI India Small Cap Index. The SMIN ETF's strong performance in 2024 is due to a surge in demand for Indian small-cap stocks, fueled by optimism about domestic economic growth, which typically benefits smaller companies more than larger ones.

Global X MSCI Argentina ETF

The Global X MSCI Argentina ETF (ARGT) tracks the MSCI All Argentina 25/50 Index investing in the largest and most liquid securities with exposure to Argentina. According to Global X, President Javier Milei and his economic policy guidance is expected to drive foreign investment into Argentina and unlock greater economic potential.

Outlook for Emerging Markets ETFs in 2024

The outlook for emerging markets in 2024 is mixed with both positive and negative factors at play. Here's a summary:

Positive Factors

Potential for growth: Emerging economies are projected to have higher growth rates than developed economies, potentially leading to stronger corporate earnings and stock market appreciation.

Negative Factors

The outlook for emerging markets in 2024 is cautiously optimistic. While growth potential exists, careful selection and an understanding of the risks involved are crucial for investors.