About a few years ago, someone in my Telegram chat brought up the topic of Emerging Markets investing.
He can justify owning an index-tracking fund, to be diversified, and harness the average returns of an ever-evolving basket of securities.
But when it comes to emerging markets, there are emerging markets to avoid and there are emerging markets that would do well.
In his opinion, you need to choose which emerging market to focus in.
Actually I don’t know.
I learn that people can conclude different things based on how they see the market, which can be very different information that is from me.
I would usually take it that this is something that we should observe along the way instead of dismissing it.
Somewhere in 2020, I developed this weird hobby of collecting some ETF and fund factsheets. I realize these fund company don’t let you see older factsheets, but sometimes… we can learn better through experience.
I kept a October 2020 factsheet of the EIMI which is the ticker for iShares Core MSCI EM IMI UCITS ETF, which is an ETF that tracks the MSCI Emerging Markets IMI index. IMI stands for investable market index, which covers the large, mid and small caps.
The following are the top 10 holdings from EIMI’s factsheet in Oct 2020:
Can see the dominance of the Chinese companies Alibaba, Tencent, Meituan. At that point, majority of Naspers value comes from its ownership of Tencent.
Just to give you a graphical view, I plotted out the return pathway of these ten companies (and then some others which I will explain later) from EIMI’s inception in 2014:
My reader is not wrong there. EIMI returned 23.4% since then or 3.4% p.a. over 6.3 years.
In a way, if you look at this performance where would you focus on for Emerging Markets? China?
I think you would.
Let us move forward to Dec 2023 or 3 years later, by taking a look at the factsheet:
Oh… suddenly China’s proportion to EIMI dropped from 38% to 23%.
In a way, India’s allocation increased from 8% to 18%. HDFC Bank starts popping up. In a way, it seems TSMC and Samsung didn’t change much it was the Chinese firms that fell.
We also start to see this interesting company call SK Hynix show up in the top 10 at 0.72% of EIMI.
Let us go to March last year (2025):
The Chinese companies recovered. You are seeing much more Chinese firms showing up. They probably take the place of the Brazil and South American companies. SK Hynix is no more.
Let us advance a few more months to August:
Oh SK Hynix pop back out again! We also see Xiaomi emerging.
Then now in January 2026:
How does SK Hynix went from nowhere in March 2025 to 2.69% in Jan 2026???
I put out all the original top 10 stocks that exist in the EIMI factsheet in Oct 2020, together with EIMI in the following chart to show the performance since then:
These includes dividends.
EIMI did roughly 69% during this 6 years or 9.1% p.a.
That is not bad.
If you pick to invest only in China, would you do as well?
- The FXI did -1.31% in total.
- The CNYA did 11.4% in total.
I think perhaps what will surprise those is that China Construction Bank did so much better!
And touch your heart if in 2020, you think that Taiwan, and South Korea will be the ones who hard carry the EIMI.
If there is one broad lesson to be learn, it is to consider seriously about how certain that you are about how the future will play out, which will affect your investment choice.
Think through the times you have a view point about which sectors, regions will do well and whether they turn out right or not.
And if you are not so certain, how certain were you today?
Diversification may not give you the highest return, but it works well if you are less sure about where will do well in the future.
Diversification in this instance is not about risk.
Is about capturing and harvesting returns as well.
This is what I think is less said than the risk management.
I invested in a diversified portfolio of exchange-traded funds (ETF) and stocks listed in the US, Hong Kong and London.
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