Around the world in ETFs: tapping the Asian growth story

Asian and emerging market shares have been among the best performers in 2025, interrupting a period that’s sometimes been marked by disappointment. And there’s still plenty to be excited about, be it the demographic growth in some countries or the rise of tech names, in countries such as China, to rival those in the US.

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As with other major markets, exchange-traded funds (ETFs) offer a straightforward way in. But there’s plenty to consider before buying.

Source: FE Analytics. 2025 figure to 10/11/2025. Past performance is not a guide to future performance.

The final piece in our “Around the world in ETFs” series (see previous articles below) looks at the defining traits of these funds, how an emerging markets fund actually differs from its Asia equivalent, and some alternative approaches.

• Around the world in ETFs: UK, Europe and Japan
• Around the world in ETFs: different plays for the US and going global
• Around the world in ETFs: single-country funds to add spice

Much in common

Investors looking to tap either the emerging markets or Asia have a couple of obvious routes in, via a fund like the iShares Core MSCI EM IMI ETF USD Acc (LSE:EIMI) or iShares Core MSCI All Country Asia ex Japan ETF.

We highlight iShares funds because they tend to disclose plenty of information, although investors can shop around. A good ETF tracks an appropriate index, has enough scale to make it large and liquid to trade and has a competitive ongoing charges figure (OCF).

If these two iShares funds tick those boxes, they also have much more in common, given that Asian and emerging market funds are notably similar.

As per the table, think of the big weightings to China, Taiwan, South Korea and India that dominate these portfolios.

Source: iShares, 7/11/2025.

They also have much in common when it comes to their top holdings: Taiwan Semiconductor Manufacturing Co Ltd ADR (NYSE:TSM) is a massive name for both, while Chinese names Tencent Holdings Ltd (SEHK:700) and Alibaba Group Holding Ltd ADR (NYSE:BABA) also feature in the top 10. Also present are the hot Korean stocks, SK Hynix and Samsung Electronics Co Ltd DR (LSE:SMSN).

Both ETFs also diversify heavily, reflecting the risky nature of this market, with the Asia fund having roughly 900 holdings and the emerging market equivalent having around 800.

The differences

So, what’s the difference?

There are points where the two diverge, and the most notable difference is currently on China.

The emerging markets fund might have a quarter of its assets there but the Asian ETF goes even further with around 33%. The Asia ETF also has more money in Taiwan, India and South Korea.

Beyond that, the emerging markets fund has a few (small) allocations that are absent from the Asia fund, including South Africa and Mexico.

The Asia ETF, meanwhile, has exposures to Singapore and Indonesia. But all these are relatively modest weightings.

Other exposures

Investors may well feel concerned about how dominant just a few countries are in the most widely followed emerging market and Asian indices. But there are a few ways to get around this.

For one, generalist active funds in this space can make big calls on the major markets. Many tend to underweight China, with an extreme example being the Pacific Assets Ord (LSE:PAC) Trust, which has a chunky allocation to India.

There are also single-country funds, which are risky but can offer a more granular form of exposure and greater rewards when things go right. The first article in this series explores the main options.

One other way to delve into this part of the world without such exposures is to back a fund focused on the Asia-Pacific region, such as the iShares Core MSCI Pac ex-Jpn ETF USD Acc GBP (LSE:CPJ1).

This offers a vastly different form of exposure, with a chunky 61.5% allocation to Australia, 20% in Hong Kong and some tiny allocations to other countries such as Singapore and New Zealand.

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Prominent stocks in this fund include Commonwealth Bank of Australia (ASX:CBA) on 9.1%, BHP Group Ltd (ASX:BHP) on 6.7%, AIA Group Ltd (SEHK:1299) on 5.3%, DBS Group Holdings Ltd (SGX:D05) on 4.3% and Westpac Banking Corp (ASX:WBC) on 4.1%. On a sector basis, roughly 45% of the portfolio is in financials.

This ETF only has an accumulating share class, which reinvests all dividends it receives, but income should form a large part of the total return.

Commonwealth Bank of Australia notes that its dividend amounted to 3.6% last year, while Australia’s high exposure to the financials and materials sectors means plenty of exposure to higher-yielding shares.

This is a very niche exposure to have in a portfolio. On the performance front, the iShares Core MSCI Pacific ex Japan ETF has lagged some of the other options recently, as the table shows.

Source: FE Analytics, 10/11/2025. Past performance is not a guide to future performance.

Exit the dragon?

Earlier in this series we discussed the emergence of MSCI World ex USA ETFs. But emerging market ETFs are a little ahead on this front, with the sell-off that hit Chinese equities in 2021 prompting the launch of various emerging market ex-China ETFs.

Using such a product and having a smaller (or no) direct allocation to China has looked sensible in recent years, much as that market has rallied in 2025.

However, excluding a big component of a market means bigger allocations elsewhere. That’s pretty evident with the iShares MSCI EM ex China ETF USD Acc GBP (LSE:EXCS).

It has more than 16% in its biggest position, in TSMC, for one, with 6.1% in its second top holding, the iShares MSCI Brazil ETF USD Dist GBP (LSE:IBZL). Samsung Electronics accounts for 4.5%, with SK Hynix on around 3%.

The concentration of this fund looks even starker, with it having 28.3% in Taiwan and more than a fifth of its assets in India.

It’s finally worth talking about yield. Asian and emerging markets have been a good source of income in recent years, with the latest edition of Janus Henderson’s Global Dividend Index report noting that payouts from China and India have done lots to drive recent growth there.

That income opportunity is not obvious from the ETFs we discuss: the iShares MSCI AC Asia ex Japan ETF lists a 12-month trailing yield of just 1.8%.

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But there are options for dividend hunters looking east. The iShares Asia Pacific Div ETF USD Dist GBP (LSE:IAPD) comes with a healthy 12-month trailing yield of 4.3%.

Active funds also do well to capture this opportunity: trusts in the AIC’s Asia Pacific Equity Income sector offer some chunky share price dividend yields, with Henderson Far East Income Ord (LSE:HFEL) on more than 10%, to give one example.

A final thing to bear in mind is that the performance of emerging markets tends to correlate with the US dollar. When the US dollar is strong, emerging markets tend to struggle. But when the US dollar is weak (such as so far in 2025), this is a tailwind for emerging markets.

Behind the correlation is emerging market countries having a large amount of US-denominated debt. So, when the dollar rises, servicing that debt becomes more expensive, acting as a drag on economic performance. The reverse is true when the dollar weakens.