If you are choosing where emerging markets fit in the bigger picture, start with our ETFs and index funds hub.
Best Emerging Market ETFs on the TSX
| ETF | Ticker | MER | Yield | Holdings | Top Country | Distribution |
|---|
| iShares Core MSCI Emerging Markets | XEC | 0.28% | ~2.5% | 1,400+ | China ~28% | Semi-annual |
| Vanguard FTSE Emerging Markets All Cap | VEE | 0.24% | ~3.0% | 5,600+ | China ~30% | Quarterly |
| BMO MSCI Emerging Markets | ZEM | 0.29% | ~2.5% | 800+ | China ~28% | Annual |
| TD Emerging Markets | TPE.B | 0.48% | ~2.0% | Varies | China ~25% | Annual |
Best US-Listed Emerging Market ETFs (Accessible from Canada)
| ETF | Ticker | MER | Holdings | AUM | Top Country |
|---|
| Vanguard FTSE Emerging Markets | VWO | 0.08% | 5,800+ | $80B+ | China ~30% |
| iShares Core MSCI Emerging Markets | IEMG | 0.09% | 2,800+ | $75B+ | China ~28% |
| iShares MSCI Emerging Markets | EEM | 0.68% | 1,200+ | $18B+ | China ~28% |
| Schwab Emerging Markets | SCHE | 0.11% | 1,800+ | $8B+ | China ~30% |
EM ex-China Options
| ETF | Ticker | MER | Holdings | Largest Country | Notes |
|---|
| iShares MSCI EM ex China | EMXC | 0.25% | 600+ | India ~25% | Removes China entirely |
| Freedom 100 EM | FRDM | 0.49% | 100 | Taiwan ~25% | Weights by freedom/governance metrics |
Country-Specific ETFs
| ETF | Ticker | MER | Country | AUM |
|---|
| iShares MSCI India | INDA | 0.64% | India | $8B+ |
| iShares MSCI Brazil | EWZ | 0.58% | Brazil | $4B+ |
| iShares MSCI South Korea | EWY | 0.58% | South Korea | $4B+ |
| iShares MSCI Taiwan | EWT | 0.58% | Taiwan | $6B+ |
| iShares MSCI Mexico | EWW | 0.58% | Mexico | $2B+ |
| KraneShares CSI China Internet | KWEB | 0.68% | China (internet) | $5B+ |
Country Breakdown of Major EM ETFs
| Country | XEC Weight | VEE Weight | GDP Rank (EM) | Key Companies |
|---|
| China | ~28% | ~30% | #1 | Tencent, Alibaba, CATL, BYD |
| India | ~20% | ~22% | #2 | Reliance, Infosys, HDFC Bank |
| Taiwan | ~17% | ~16% | #3 | TSMC, MediaTek, Hon Hai |
| South Korea | ~12% | ~0% (FTSE classifies as developed) | #4 | Samsung, SK Hynix, LG |
| Brazil | ~5% | ~6% | #5 | Petrobras, Vale, Itaú |
| Saudi Arabia | ~4% | ~4% | #6 | Saudi Aramco |
| South Africa | ~3% | ~4% | #7 | Naspers |
| Mexico | ~2% | ~2% | #8 | América Móvil, Walmex |
| Indonesia | ~2% | ~2% | #9 | Bank Central Asia |
| Thailand | ~2% | ~2% | #10 | PTT, CP All |
Note: FTSE (used by Vanguard/VEE) classifies South Korea as developed; MSCI (used by iShares/XEC) classifies it as emerging.
The China Exposure Debate
If you want developed-market diversification without this concentration risk, see best international ETFs in Canada.
| Viewpoint | Argument | Solution |
|---|
| Include China | 18% of world GDP — can’t ignore it; diversification benefit; growth potential | Standard EM ETFs (XEC, VEE) |
| Exclude China | Regulatory risk, geopolitical tension, government intervention in markets | EM ex-China (EMXC) |
| Reduce China | Balance exposure without eliminating it entirely | Smaller EM allocation (5%) |
| Separate allocation | Control China weight independently | 5% EM ex-China + 2% China-specific ETF |
| Period | Emerging Markets (MSCI EM) | Developed Markets (MSCI World) | S&P 500 |
|---|
| 2020–2024 (annualized) | ~3% | ~10% | ~12% |
| 2010–2024 (annualized) | ~4% | ~10% | ~12% |
| 2000–2024 (annualized) | ~7% | ~6% | ~7% |
| 2000–2010 (annualized) | ~16% | ~1% | ~1% |
EM outperformed massively in 2000s, underperformed in 2010s-2020s. Past performance does not guarantee future results.
Why Include Emerging Markets
| Reason | Detail |
|---|
| 55% of global GDP | Emerging markets produce over half of world economic output |
| Younger demographics | Working-age populations growing (vs aging in developed markets) |
| Rising middle class | Consumer spending growing rapidly |
| Diversification | Low correlation with North American markets (some cycles) |
| Valuations | EM stocks trade at significant discount to US stocks (P/E ~12 vs ~22) |
| Growth potential | Higher GDP growth rates (5–7% vs 1–3% for developed) |
Risks of Emerging Market ETFs
| Risk | Examples |
|---|
| Political instability | Coups, sanctions, nationalization (Brazil, Turkey, Russia) |
| Currency volatility | EM currencies can lose 20–40% suddenly vs USD/CAD |
| Regulatory risk | China tech crackdown destroyed billions in shareholder value |
| Governance | Weaker corporate governance, minority shareholder protections |
| Liquidity risk | Some EM stocks have thin trading volumes |
| Capital controls | Governments can restrict capital outflows |
| Geopolitical risk | Taiwan-China tensions, US-China trade war |
| Higher volatility | EM drawdowns regularly exceed 30–40% |
| Missing out on US | Heavy EM allocation means less US tech/growth exposure |
EM Currency Impact on Returns
| Scenario | Impact on CAD-Based Investor |
|---|
| EM currencies strengthen vs CAD | Positive — boosts returns |
| EM currencies weaken vs CAD | Negative — drags returns even if local stocks rise |
| USD strengthens vs EM currencies | Negative for EM stocks (capital outflows) |
| USD weakens vs EM currencies | Positive for EM stocks (capital inflows) |
Currency impact can add or subtract 5–15% to annual returns.
Portfolio Allocation
This decision is easiest when you first set your broad stock/bond mix using asset allocation by age.
Recommended EM Allocation
| Approach | EM Weight | Implementation |
|---|
| Market-weight global | ~10% | Already in XEQT/VEQT (~5-8%) |
| Moderate overweight | 10–15% | Add XEC or VEE alongside core |
| Equal-weight by region | 20–25% | Deliberate EM tilt |
| Underweight/avoid | 0–5% | Via all-in-one only, no additional EM |
If you want those exposures bundled for simplicity, compare best all-in-one ETFs in Canada.
Sample Global Portfolio with EM Tilt
| Holding | Allocation | Region |
|---|
| VFV (S&P 500) | 35% | US |
| XIC (Canada) | 25% | Canada |
| XEF (EAFE) | 20% | Europe/Japan/Australia |
| XEC (Emerging Markets) | 15% | EM |
| ZAG (Bonds) | 5% | Canada |
TSX-Listed vs US-Listed EM ETFs
| Factor | TSX-Listed (XEC, VEE) | US-Listed (VWO, IEMG) |
|---|
| MER | 0.24–0.29% | 0.08–0.11% |
| Currency | Trades in CAD | Trades in USD — need FX conversion |
| US withholding tax (RRSP) | 15% drag on US-layer dividends | 0% (Canadian treaty with US) |
| US withholding tax (TFSA) | 15% drag | 15% drag |
| Complexity | Low — buy on TSX | Moderate — need USD |
| Best for TFSA | ✅ Simpler | Slightly better tax on direct EM dividends |
| Best for RRSP | Good | Better MER, no US withholding |
If you plan to buy the US-listed versions, use Norbert’s Gambit and review best account type for US stocks and ETFs in Canada.