U.S. stocks may be breaking records, but a flood of investor cash is moving elsewhere—toward emerging markets, where valuations are cheaper, currencies are strengthening and years of underperformance may finally be reversing.
The iShares Core MSCI Emerging Markets ETF IEMG has attracted $7.4 billion in inflows so far in 2025, making it the 12th most bought ETF overall and the second-most popular international equity ETF after the Vanguard Total International Stock Index Fund ETF VXUS, which pulled in $7.8 billion.
The US-listed emerging-market fund has also just posted its biggest 4-week inflow since 2021, taking in $3 billion as investor appetite for international diversification in equities heats up.
Chart: iShares Core MSCI Emerging Markets ETF See Billions In Inflows
Why Emerging Markets, And Why Now?
Macro analyst Callum Thomas, founder of Topdown Charts, added that many investors remain “seriously underexposed to what may be one of the biggest opportunities in the coming decade.”
He pointed to several tailwinds for EM stocks:
- Valuations: EM stocks trade at steep discounts to developed markets
- Allocations: Global portfolios are underweight EM equities
- Currencies: The U.S. dollar may have peaked, while EM currencies are rebounding
- Monetary policy: Many EM central banks are actively stimulating growth
- Sentiment: Investor skepticism remains high—a classic contrarian signal
“We may well be on the cusp of a golden decade for emerging markets,” Thomas said.
Technically, Thomas sees signs of a major shift. “There is a clear long-term uptrend in play,” he said, noting that EM equities are currently “significantly below” trend.
ETF.com analyst Sumir Roy said the trend is being fueled by investor recognition of growing strength outside the U.S. “This year’s rally in international equities has extended to emerging markets, and ETF investors are taking notice,” Roy said.
The analyst also broke down why the two most popular U.S.-based emerging markets ETFs have delivered different performance this year.
So far this year, the iShares Core MSCI Emerging Markets ETF is up 15.6%, outperforming Vanguard Emerging Markets Stock Index Fund ETF VWO’s 12.7% gain.
Essentially, the difference came down to the exclusion of one key country. South Korea—is entirely absent from the Vanguard ETF– but makes up 11% of IEMG and has been one of the world’s top-performing markets in 2025.
The iShares MSCI South Korea ETF EWY is up 38% year to date, contributing 3.6 percentage points to IEMG’s performance, second only to China’s 4.3 points.
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