It has been a volatile year for the S&P/ASX 200 Index (ASX: XJO). Australia's benchmark index has lagged behind global markets as inflation, interest rates and global conflict have weighed on sentiment.
After another fall yesterday, the ASX 200 is down roughly 2.5% year to date.
When the market here on home soil lags, it reinforces the importance of diversification to overseas equities.
One option investors can target is emerging markets.
Image source: Getty Images
What are emerging markets?
Emerging markets are economies that are in the process of rapid industrialisation, urbanisation, and economic development, but are not yet considered fully developed markets.
Common examples typically include countries such as India, Brazil, Indonesia, and Vietnam, which often offer higher long-term growth potential than developed economies like Australia or the United States.
Emerging markets can provide diversification and strong returns driven by expanding middle classes and infrastructure investment. However they also carry higher risks, including political instability, currency fluctuations, weaker regulatory systems, and greater market volatility.
In 2026, several emerging markets ASX ETFs have raced ahead of the Australian market.
iShares MSCI Emerging Markets ETF (ASX: IEM)
This ASX ETF aims to provide investors with the performance of the MSCI Emerging Markets Index, before fees and expenses. The index is designed to measure the equity market performance in global emerging markets.
It has a large weighting towards companies in the tech, financials and consumer discretionary sectors.
By country, its largest exposure is to Taiwan (24%), China (23%) and South Korea (18%).
In 2026, this ASX ETF has vastly outperformed the ASX 200, rising 9%.
VanEck MSCI Multifactor Emerging Markets Equity ETF (ASX: EMKT)
This ASX ETF provides a diversified portfolio of large and mid-cap stocks from emerging markets countries.
At the time of writing, it includes roughly 220 underlying holdings.
Its largest exposure is to companies based in South Korea (26%), China (25%) and Taiwan Region (23%).
Approximately one third of the fund is made up of technology shares.
It has risen an impressive 16% so far this year and 33% over the last 12 months.
Betashares MSCI Emerging Markets Complex ETF (ASX: BEMG)
Another emerging markets fund that has performed strongly in 2026 is this relatively new fund from Betashares.
It aims to track the performance of the MSCI Emerging Markets Net Total Return Index.
It provides exposure to more than 1,000 stocks across more than 20 emerging countries in fast-growing regions including Asia, Latin America, Eastern Europe and Africa.
The fund has risen almost 12% year to date.
