iShares MSCI Emerging Markets ex China ETF

EMXC

Market cap $24.3B

When Chinese equities perform well, the fund benefits from that allocation. When China struggles, the country's weighting can become a drag on overall emerging market returns.

The action in Emerging Markets ETFs this year has been really interesting to watch. From record-breaking asset flows to impressive results, albeit massively dispersed, this category of funds has had quite a ride so far in 2026.

Three funds dominate the emerging markets ex-China conversation right now, and each one has put meaningful daylight between itself and the S&P 500 so far this year.

The S&P 500 is up about 8% year to date. The same money parked in iShares MSCI Emerging Markets ex China ETF (NASDAQ:EMXC) is up roughly 29.2%.

Investing in emerging markets (EM) used to be synonymous with getting exposure to China. It's an ideal notion, given that it's the second largest economy and thus commands a heavy weight in standard EM benchmarks.

Geopolitical tensions and governance concerns in China have prompted institutional investors to reallocate emerging-market exposure toward India, Brazil, Southeast Asia, and Mexico.

The iShares MSCI Emerging Markets ex China ETF (EMXC) is rated a buy, driven by structural capital rotation out of China and strong U.S. policy support for friend-shoring. EMXC offers concentrated exposure to Asian semiconductors and Indian financials, with TSMC, Samsung, and SK Hynix comprising over 29% of the fund. Sector allocation is heavily tilted to technology (40.39%) and financials (21.66%), making EMXC more a focused tech/financials play than a broad EM vehicle.

EMXC removes China's 25% drag from EM exposure, capturing semiconductor and financial strength across Taiwan, South Korea, and India instead. Five-year annualized outperformance of 471 basis points over EEM, with a Sharpe ratio of 0.50 vs. EEM's 0.20, makes the ex-China thesis quantifiable. Key risks include Taiwan Strait concentration (TSMC at 17.79%), India-Pakistan tensions, and fee competition from Vanguard's VEXC at 0.07%.

The iShares MSCI Emerging Markets ex China ETF (EMXC) offers large and mid-cap emerging market exposure while excluding exposure to China. EMXC has outperformed the broader EEM ETF since inception, largely due to its lack of Chinese equity exposure. TSM represents outsized exposure for EMXC and thus forming a view on this stock is key to forming a view on EMXC.

At the same time developed markets have been generating policy and macro noise, emerging markets have been quietly outperforming. The inextricable relationship between the direction of U.S. monetary policy and emerging market risk assets remains powerful, but this time the rally is not just about the Fed.