Emerging Market (“EM”) ex-China equities delivered positive returns over a volatile quarter, supported by commodity strength and relatively attractive valuations.
Market Review
The MSCI Emerging Markets ex-China Index Net Total Return (NETR) (“the benchmark”) returned 34.53% in the second quarter, one of the strongest quarters on record for the asset class¹. Technology led the advance across the region, driven by continued AI infrastructure spending and rising semiconductor demand. South Korea stood out, with the benchmark rallying more than 85% on the back of memory chip and hardware names², while Taiwan also posted a sharp gain on the same AI-driven demand. The S&P 500 rose 14.9% over the same period, underscoring the scale of the EM ex-China outperformance³. The U.S. Dollar Index firmed only modestly, moving up only 1.22% over the period, though did not have a strong impact on the appetite for EM ex-China equities. WTI crude oil fell sharply as geopolitical tension in the middle east improved and supply concerns eased⁴. Performance dispersion stayed wide even within the rally. South Korea, Taiwan, and Hungary stood out as the strongest performing countries, while Indonesia, Brazil, and Saudi Arabia lagged⁵.
Fund Performance & Attribution
EMM returned 29.83% (NAV return) and 28.09% (market price return) in the second quarter versus 34.53% for the benchmark ⁶. Year to date, the fund returned 32.71% (NAV) against 38.78% for the benchmark⁷. For context, EMM's NAV return has outpaced the broader, China-inclusive MSCI Emerging Markets Index (Net), which returned 24.05% in the second quarter and 23.85% year to date, the index EMM tracked prior to its March 30, 2024 benchmark transition8.
From a country perspective, stock selection in Taiwan, South Africa, and Greece drove the largest relative gains. An underweight to South Korea was by far the largest detractor, as the fund's Korean holdings lagged a benchmark dominated by a handful of AI-exposed semiconductor names. Mexico and Poland also detracted on a much lesser scale.
From a sector perspective, positioning in financials, communication services, and real estate added to relative performance, while industrials, information technology, and consumer staples detracted.
In terms of individual securities, MediaTek, Aspeed Technology, and Fubon Financial Holding contributed the most to performance. The fund’s underweight positions in SK Hynix, Samsung Electro-Mechanics, and Samsung Electronics were the largest detractors, reflecting the fund's lack of concentration to momentum in the strongest-performing corner of the Korean market.
We added Doosan Enerbility, HD Hyundai Electric, Kazatomprom, OTP Bank, Samsung C&T, Samsung Electro-Mechanics, and SK Square during the quarter, funded in part by trims to positions in Bank Central Asia, BDO Unibank, TBC Bank Group, and United International Transportation.
Effective May 12, 2023, the fund acquired the performance, financial, accounting, and other historical information of the Mirae Asset Emerging Markets Fund. Performance shown prior to May 15, 2023 reflects the return of the Mirae Asset Emerging Markets Fund's I shares with a NAV conversion ratio of 0.40 applied in connection with the acquisition. Market price returns prior to that date reflect the predecessor fund’s NAV return.
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. For performance data current to the most recent quarter- and month-end, please visit globalxetfs.com/funds/emm. Total expense ratio: 0.66%.
Holdings are subject to change.
Outlook
We maintain a positive outlook on EM ex-China equities. A steady or weakening dollar, combined with an incrementally dovish Federal Reserve, would likely support capital flows into emerging markets. Within this backdrop, we see differentiated opportunities across regions. Korea and Taiwan offer strong technology fundamentals at discounted levels versus U.S. peers. India is expected to continue to benefit from structural growth, while ASEAN (Association of Southeast Asian Nations) markets offer favorable demographic trends. Greece, scheduled for developed market upgrade by MSCI in 2027, offers a compelling pocket of deep value with a catalyst. We are also holding off benchmark positions in Kazakhstan and Argentina. Latin America, particularly Brazil, Chile, and Colombia, stands out given improving policy dynamics, commodity exposure, and monetary policy flexibility.
Why This Fund
We believe active management remains critical as EM economies do not move in lock step together. Companies that generate returns above their cost of capital, supported by strong management teams and disciplined balance sheets, should outperform. The strategy focuses on identifying businesses with durable competitive advantages and the ability to compound returns over time. EMM delivers bottom-up fundamental analysis with the fee structure, liquidity, and transparency of its ETF wrapper, now with a lower expense ratio of 65 basis points (as of April 1, 2026).
Related ETF
EMM – Global X Emerging Markets ex-China ETF
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