India Boosts Emerging Market ETFs as US Yields Dip, Dollar Falls

India is once again leading flows into US exchange-traded funds tracking emerging markets, boosting one of the most popular trades in 2023 as declining US yields and a weakening dollar turn investors toward assets in the developing world.

The optimism can be seen in the relentless asset growth of the iShares MSCI Emerging Markets ex-China ETF, known by its ticker EMXC, which gives investors exposure to emerging market equities, excluding Chinese stocks.

The fund has seen total assets grow over 50% so far this quarter, the most for any quarterly period dating back to September 2021, according to data compiled by Bloomberg. The fund’s top geographic allocation is in Indian equities, followed by Taiwanese and South Korean stocks.

EX China Trade Sees Huge Asset Growth

“Ultimately, India stands out as its own story, as it offers more attractive scale and demographic dividends than most emerging markets, and does so under a democracy,” said Malcolm Dorson, the head of emerging-market strategy at Global X Management Co. “It’s also coming from a much lower base than most emerging markets, which translates into more growth opportunities.”

Last week, India reported that its economy grew at a much faster pace than forecast in the third quarter as manufacturers boosted production, consumption picked up pace and Prime Minister Narendra Modi’s government ramped up investment before polls next year.