Editor’s note: This article is a part of InvestorPlace.com’s Best ETFs for 2019 contest. The reader’s choice pick is the iShares MSCI Emerging Markets ETF (NYSEARCA:EEM).
Despite fears of a global economic slowdown, the iShares MSCI Emerging Markets ETF (NYSEARCA:EEM) seems to be doing all right for itself so far in 2019. Up 10% so far in the first quarter, this emerging markets fund has been hanging with the pack despite all the trade uncertainty.
The general positive vibes in the overall market are certainly not hurting anything. However, one of the positives for EEM stock in particular has to do with its 32.4% exposure to Chinese stocks. After a terrible drubbing for many Chinese stocks in 2018, spurred largely by the trade war between China and the United States, things are looking up for these companies in 2019.
Reasons to Like EEM Stock
First, hope continues to spring eternal for an end to the trade war. The beaten-down Chinese stocks were just too good a bargain to pass up for some investors, who anticipate a return to form once trade returns to normal.
Second, MSCI has decided to increase the weighting of Chinese stocks among its indexes. While the goal of a 3.3% share of the indexes doesn’t sound that big, remember that’s four times the current level. And MSCI isn’t the only one boosting investors’ access to these securities: the Bloomberg Barclays Global Aggregate Index will also be including Chinese companies starting next month.
But of course, China isn’t the only area from which EEM stock draws. It is simply the largest. Another third of the index comes from Taiwan, India and Korea, so this fund isn’t totally under the thumb of problems that may hit China specifically.
And while you’re looking toward the future and hoping that global news boosts this fund, you can also enjoy a bit of income for your trouble. EEM currently has a 12-month trailing yield of 2.1%. Nothing like getting paid while you wait for the leadership of two economic powerhouses to sort themselves out.
The Bottom Line for EEM
Is EEM going to take the top spot in 2019’s Best ETFs contest? I think it’s possible. The fund has been hanging around in the top five for most of the first quarter, battling with the likes of Pacer Benchmark Data & Infrastructure Real Estate ETF (NYSEARCA:SRVR) and Powershares Water Resource Portfolio (NASDAQ:PHO). But as outlined above, there are some potentially huge tailwinds that could be just over the horizon.
Only time will tell, but thus far the readers’ choice looks like a smart one.
As of this writing, Jessica Loder did not hold a position in any of the aforementioned securities.
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