Emerging Markets ETF Gains 10.6% YTD as Index Breaks 2021 Highs
iShares MSCI Emerging Markets ETF has gained 10.6% year-to-date after a 34% rise in 2025, as its index breaks 2021 highs with over two-thirds above their 200-day moving average. A forward P/E 40% below US peers and projected 29% 2026 earnings growth versus 14% in the US underpin upside.
1. ETF Performance and Technical Breakout
The iShares MSCI Emerging Markets ETF has rallied 10.6% year-to-date following a 34% gain in 2025. The MSCI Emerging Markets Index recently surpassed its 2021 highs, with more than two-thirds of its constituents trading above their 200-day moving averages, signaling sustained technical strength.
2. Earnings Growth and AI Exposure
Analysts project 29% EM earnings growth in 2026 versus 14% in the US. With a technology weighting exceeding 30%, markets such as South Korea, Taiwan and China stand to gain from AI-driven capital expenditure, while corporate governance improvements and capital allocation reforms support profit expansion.
3. Valuation Discount and Dollar Impact
EM equities trade at a roughly 40% forward P/E discount to US peers despite the rally. A weakening dollar enhances emerging market export competitiveness and lowers debt-servicing costs, suggesting potential for multiple expansion if macro conditions remain favorable.