Emerging markets equities finished the third quarter nearly flat as an AI chip selloff and rising yields offset gains in Hong Kong and Latin America.
Market Review
Emerging markets (EM) equities fell 0.37% in the third quarter.1 A July selloff in AI-linked memory and semiconductor shares did most of the damage and centered on Korea.2 The Federal Reserve raised rates in September for the first time since 2023, and global bond yields rose.3 Elevated oil prices and heavy foreign selling weighed on India.4 Dispersion ran wide. Greece, Colombia and Poland each gained more than 15%, while Korea and India, two of the largest MSCI Emerging Markets Index weights, declined.5
Fund Performance & Attribution
EMC returned slightly less than the MSCI Emerging Markets Index (Net) (“the benchmark”) for the quarter, underperforming by 9 basis points (NAV). Year to date, EMC returned 20.65% versus 23.38% for the benchmark. The following attribution nets each issuer’s local, ADR and GDR lines into one position, isolating the stock decision from the vehicle.6
Contributors: From a country perspective, Hong Kong, South Korea and Canada added the most, with an overweight of 3.28 percentage points in Hong Kong, a near-benchmark weight in Korea and an overweight in Canada. From a sector perspective, information technology, consumer discretionary and financials led, with an underweight in information technology and overweights in the other two. In terms of individual securities, an underweight in SK Hynix (3.56% versus 5.71% in the benchmark) and overweights in MediaTek and Shinhan Financial Group contributed most.
Detractors: From a country perspective, China, Taiwan and Brazil detracted. An underweight of 5.03 points in China hurt as the benchmark’s holdings there rose 2.45%. Holdings also trailed the benchmark’s in Taiwan and Brazil, both near benchmark weight. From a sector perspective, industrials, energy and health care lagged, with an overweight in industrials, where fund holdings fell -13.09% against -6.11%, and underweights in energy and health care. In terms of individual securities, Taiwan Semiconductor (underweight at 14.03% versus 15.27%), SK Square (overweight, 1.80% versus 0.61%) and Samsung Electronics (near-benchmark weight) detracted most.
This quarter, EMC added Banco BTG Pactual, Bank Pekao and Naura Technology and sold Xiaomi, Tata Consultancy Services and four smaller positions.
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/emc. Expense Ratio: 0.65%.
Effective May 12, 2023, the fund acquired the performance, financial, accounting, and other historical information of the Mirae Asset Emerging Markets Great Consumer Fund. Performance shown prior to May 15, 2023 reflects the return of the Mirae Asset Emerging Markets Great Consumer Fund's I shares with a NAV conversion ratio of 0.47 applied in connection with the acquisition. Market price returns prior to that date reflect the predecessor fund’s NAV return.
Holdings are subject to change.
Outlook
We stay constructive on emerging markets heading into the fourth quarter based on 4 factors:
Risks include further Federal Reserve rate tightening, elevated oil prices and the pace of AI capital spending.
Why This Fund
We believe active management remains critical, as dispersion across EM remains high. Companies that generate returns above their cost of capital, supported by strong management and disciplined balance sheets, could outperform. The strategy focuses on actively identifying businesses positioned to benefit from long-term secular growth in domestic consumption, while maintaining limited exposure to more cyclical commodity segments. EMC delivers bottom-up fundamental analysis with the fee structure, liquidity, transparency, and potential tax efficiency of its ETF wrapper.
Related ETF
EMC – Global X Emerging Markets Great Consumer ETF
Click the fund name above to view current performance and holdings. Holdings are subject to change. Current and future holdings are subject to risk.
