BlackRock has unveiled the iShares MSCI Emerging Markets ex China ETF (Nasdaq: EMXC), providing broad exposure to large- and mid-cap emerging market equities while excluding stocks from China.

The iShares MSCI Emerging Markets ex China ETF (Nasdaq: EMXC) tracks 23 emerging market countries, excluding China.

The fund tracks the MSCI Emerging Markets ex China Index which covers 23 of the 24 emerging market countries within the MSCI Emerging Markets Index, excluding China. With 693 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.

As China is the largest country exposure in the MSCI Emerging Markets Index, its exclusion from the MSCI Emerging Markets ex China Index has resulted in relatively significant differences in exposures between the two indices. The largest country exposure in the MSCI Emerging Markets Index are China (27.9%), South Korea (15.6%), Taiwan (12.5%), India (8.8%) and Brazil (6.6%). In EMXC’s underlying index, the largest country exposures are to South Korea (21.6%), Taiwan (17.3%),India (12.2%), Brazil (9.2%) and South Africa (9.1%).

China’s exclusion has also led to some minor changes in sector exposure, most notably the MSCI Emerging Markets ex China Index has reduced its information technology exposure from 26.6% to 23.5%, and increased its materials exposure from 7.1% to 9.4%.

The largest constituents in the MSCI Emerging Markets ex China Index are Samsung (6.0%), Taiwan Semiconductor (5.0%) and Naspers (2.5%).

While China’s growth story is slowing, its stock market has outperformed most other emerging markets over short- and medium-term horizons. Its exclusion from the MSCI Emerging Markets ex China Index has resulted in lower performance metrics compared to the MSCI Emerging Markets Index.

The MSCI Emerging Markets ex China Index has returned 16.1% year-to-date, 20.8% over the past year and has produced an annualized return of -0.6% over the past three years, compared to 18.4%, 23.8% and 1.1% respectively for the MSCI Emerging Markets Index. The MSCI Emerging Markets ex China Index has displayed lower annualized volatility compared to the MSCI Emerging Markets Index although its Sharpe ratio is still lower across all major time periods.

Source: MSCI.

EMXC has a total expense ratio (TER) of 0.49% due to a contractual fee waiver in place until at least 31 December 2022. Its gross expense ratio is 0.58%.