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Avoiding China During Virus Crisis Hurts EMXC


  • Last fall I wrote an article about an ETF that excluded China due to its large weight in most Emerging Market funds.
  • With the current virus shutting down Chinese production, I would have thought EMXC would outperform EEM.  NOT!
  • This article tries to figure out why EMXC has under performed EEM in 2020.


When MSCI decided to continue increasing China’s weight in their Emerging Markets index, now over 33%, I found an ETF that would allow investors wanting to avoid China to do so, NASDAQ:EMXC. The COVID-19 virus was first reported at the end of 2019 and is spreading worldwide. With China being the world’s 2nd largest economy and #1 exporter, logic would seem to indicate any ETF exposed to Chinese companies would trail similar ETFs without that exposure since the start of 2020. For the two MSCI indexed EM funds, that has not been true. EEM was down 9.69% while EMXC dropped 12.57% in the first two month of 2020. This article is my attempt to read the tea leaves to understand why.

Comparing EMXC and EEM

Ishares provides several EM ETFs based on various MSCI Indices. MSCI Emerging Markets (NYSEARCA:EEM), with $29b in assets, and a newer one with only $35mm in assets, the MSCI Emerging Markets Ex China (EMXC), which I will use in this article.

Since EMXC has no China exposure, the other country weights and performance for the first two months on 2020 was the first clue I examined.

Country EMXC Weight EEM Weight Weight Difference EM ETF Available 2-MO Return
China 0.00% 34.61% -34.61% MCHI -3.06%
Taiwan 18.74% 11.93% 6.81% EWT -9.02%
South Korea 17.99% 11.21% 6.78% EWY -11.63%
India 12.56% 7.92% 4.64% INDA -8.42%
Brazil 9.71% 6.17% 3.54% EWZ -19.16%
South Africa 6.28% 4.01% 2.27% EZA -17.88%
Russia 5.46% 3.45% 2.01% ERUS -14.89%
Saudi Arabia 3.92% 2.50% 1.42% KSA -12.52%
Thailand 3.60% 2.26% 1.34% THD -19.75%
Mexico 3.33% 2.08% 1.25% MXF -10.43%
Malaysia 2.56% 1.64% 0.92% EWM -10.66%
Indonesia 2.07% 1.31% 0.76% EIDO -15.74%
United Kingdom 1.45% 2.04% -0.59%

This article was written by

Retired Investor profile picture

I have both a BS and MBA in Finance. I have been individual investor since the early 1980s and have a seven-figure portfolio.  I was a data analyst for a pension manager for thirty years until I retired July of 2019. My initial articles related to my experience in prepping for and being in retirement. Now I will comment on our holdings in our various accounts. Most holdings are in CEFs, ETFs, some BDCs and a few REITs. I write Put options for income generation. Contributing author for Hoya Capital Income Builder

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (1)

Retired Investor profile picture
Could the tide be changing with recent actions by the CCP? www.portfoliovisualizer.com/...
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