Best ETFs for 2019: Can the iShares Emerging Markets ETF Surge?

EEM - Best ETFs for 2019: Can the iShares Emerging Markets ETF Surge?

Editor’s note: This article is a part of’s Best ETFs for 2019 contest. The reader’s choice pick is the iShares MSCI Emerging Markets ETF (NYSEARCA:EEM).

When it comes to exchange-traded funds, it turns out InvestorPlace readers are pretty highly divided.

It shouldn’t be surprising that the Select Sector SPDR funds earned a fair amount of attention. The Healthcare SPDR (NYSEARCA:XLV), Financial SPDR (NYSEARCA:XLF) and Utilities SPDR (NYSEARCA:XLU) all garnered top-10 spots in the voting, which suggests some people are expecting a slowdown in 2019. Utilities and healthcare are both likely to hold up even if the market takes a downturn — people will always need doctors and power. And the XLF actually ended up becoming Dana Blankenhorn’s pick for the contest.

The Powershares QQQ Trust ETF (NASDAQ:QQQ) also got a fair amount of support, which didn’t surprise me too much as it’s last year’s reader’s choice pick (and the 2018 Best ETFs contest leader, at present). But more surprising to me was that the KraneShares CSI China Internet ETF (NYSEARCA:KWEB) tied the QQQ in the voting. Those voters believe that tech stocks, whether in the U.S. or China, still have plenty to offer investors.

KWEB’s focus on ex-U.S. stocks is shared by the winning fund, the iShares MSCI Emerging Markets ETF (NYSEARCA:EEM).

The EEM ETF is attempting to track the results of an “index composed of large- and mid-capitalization emerging market equities.” The average market cap of stocks in the fund is around $29 billion, with more than half of the holdings being considered “giant” by market cap according to Morningstar. Mid-cap stocks make up only about 10% of the overall holdings.

Emerging markets can mean a lot of things, but looking at the nearly $30 billion fund’s holdings, we see heavy exposure to Asia, with China making up nearly a third by itself. Korea and Taiwan also make up more than 10% of the fund each.

Considering the heavy weighting toward Asia,  some of the major holdings are not going to surprise anyone. Tencent (OTCMKTS:TCEHY) and Alibaba (NYSE:BABA) each make up more than 4% of the fund, and Taiwan Semiconductors (NYSE:TSM) comes in a close third. Samsung and Baidu (NASDAQ:BIDU) are also in the top 10.

Bottom Line on the EEM ETF

The ETF faces some headwinds. First and most prominent, thanks to the U.S./China tariffs, China’s economy is slowing down.

But those tariffs may also be setting up one of the biggest reasons to expect EEM to outperform in 2019. The fund is down about 16%, and losses from Chinese stocks have caused a good chunk of that. But once the two countries find some way to bring the trade war to an end, I think people are going to realize just how far they’ve punished some of these Chinese stocks. The potential for a rebound is very real.

Now, this would depend on the trade dispute actually coming to an end, but since it’s in the interests of both countries to reach an agreement, I’m optimistic. And if they can, it could give the EEM ETF the push it needs to take the top spot in the Best ETFs for 2019 contest.

Jessica Loder is an assistant editor at As of this writing, she did not hold a position in any of the aforementioned securities.

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