Emerging Markets Ex China ETF Surges 13.5% YTD as Valuation Gap Narrows
iShares MSCI Emerging Markets ex China ETF has surged 13.5% year-to-date, outpacing the 10.6% gain of the broader emerging markets ETF. Drivers include U.S. dollar weakness, AI-driven capex supporting Asia tech supply chains and projected 29% EM earnings growth in 2026 versus 14% in the U.S.
1. Strong Year-to-Date Performance
iShares MSCI Emerging Markets ex China ETF has gained 13.5% year-to-date, outpacing the 10.6% rise of the broader emerging markets ETF as investors rotate into assets excluding China. This rally places it among the top-performing EM vehicles, with key exposures to South Korea, Brazil and Peru driving returns.
2. Key Growth Catalysts
U.S. dollar weakness has boosted relative EM asset values and reduced local debt servicing costs, while AI-driven capital expenditure in Asia’s technology supply chain underpins gains. EM earnings are projected to grow 29% in 2026 versus 14% in the U.S., reflecting improving corporate governance and middle-class expansion.
3. Valuation Discount Narrows
The ex-China ETF trades at a roughly 40% forward price-to-earnings discount to the U.S., but this gap is closing as earnings recover and investor demand picks up. Technical indicators show more than two-thirds of EM ex-China components trading above their 200-day moving averages, signaling sustained momentum.