What drove EM equity underperformance versus U.S. equities and when might EM outperform?

EM equity underperformance versus U.S. stocks (2010-2023): China's regulatory crackdown on technology companies (Alibaba, Didi, Tencent, education companies) in 2021-2022 destroyed enormous market value; Chinese real estate crisis (Evergrande, Country Garden) created deflationary pressure; USD strength — a rising dollar makes EM assets worth less in USD and makes EM debt service more expensive; U.S. technology dominance — Apple, Microsoft, Nvidia, Alphabet, Amazon, and Meta generated exceptional returns that international markets couldn't match; India — bright spot within EM, Indian equities significantly outperformed; Brazil, South Africa, Turkey — significant volatility and underperformance. Potential EM outperformance catalysts: USD weakness — if the Federal Reserve cuts rates aggressively or the dollar depreciates, EM assets benefit from both currency effects and lower global risk-free rates; China stimulus — significant Chinese economic stimulus could reaccelerate Chinese equity markets (multiple stimulus packages have been deployed 2023-2024 with limited market impact so far); India structural growth — India's growing middle class, manufacturing shift (companies moving supply chains from China), and technology services exports support sustained above-average growth; valuation reversion — EM equities trade at large discounts to U.S. equities on earnings multiple and price-to-book basis; historically, wide valuation gaps have eventually narrowed.

What is China A-shares and how does VWO's A-share inclusion affect the fund?

China A-shares are shares in mainland Chinese companies listed on the Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE), trading in Chinese yuan (renminbi). Historically, China A-shares were only accessible to mainland Chinese investors. Access for foreign investors: QFII (Qualified Foreign Institutional Investor) — regulatory program allowing approved foreign institutions to invest in A-shares with quota limits; Stock Connect — Hong Kong-Shanghai and Hong Kong-Shenzhen programs launched 2014-2016 allowing international investors to buy select A-shares through the Hong Kong exchange. Before Stock Connect and MSCI/FTSE A-share inclusion: foreign investors in China equities primarily accessed H-shares (Hong Kong-listed, same Chinese companies but different share classes) or ADRs (U.S.-listed Chinese companies like Alibaba, JD.com on NYSE). China A-share inclusion in EM indices: MSCI began including China A-shares in its EM index in 2018 at a 5% inclusion factor (increasing over time); FTSE began inclusion as well; VWO's FTSE index includes China A-shares at a partial inclusion factor. Why it matters: the Chinese stock market's total market cap is enormous; many domestically-oriented Chinese companies (large banks, consumer companies, A-share-only listings) are only accessible through A-shares; VWO's A-share inclusion gives broader Chinese market exposure than older EM ETFs that only held H-shares.

How should investors think about EM allocation size in a diversified portfolio?

Emerging market equity allocation considerations: Market capitalization weight — EM countries represent approximately 12-15% of world market capitalization; a market-cap-weighted global portfolio would allocate roughly 12-15% to EM. GDP-weight argument — EM countries represent approximately 45-50% of global GDP (at purchasing power parity); some investors argue EM allocation should reflect economic weight, not market cap (implying 40%+ EM), but market cap is more directly relevant to investable opportunity. Common allocation approaches: conservative (international skeptics): 0-5% EM; moderate (global diversification): 10-15% EM (consistent with market cap weight); aggressive (EM optimists): 20-30% EM. Practical considerations: EM is more volatile than developed markets (annual standard deviation approximately 20-25% vs. 15-18% for developed market equities); adding EM increases portfolio volatility; EM correlations with U.S. equities have increased over time (globalization), reducing diversification benefit; investors who are already exposed to EM through U.S. multinational companies (Apple sells in China, Estee Lauder in Asia, etc.) have indirect EM exposure without holding EM ETFs. Vanguard and many target-date funds use approximately 20-25% EM as a share of international allocation (with ~80% developed international), resulting in 5-10% total portfolio EM allocation for a balanced portfolio.

brimindinvest.com / compare / spem-vs-vwoLIVE

SPEM

SPDR Portfolio Emerging Markets ETF (SPEM) · ETF - Emerging Market Equities

$53.08

+5.30% this month

VERSUS

⟷

COMPARE

VWO

Vanguard FTSE Emerging Markets ETF (VWO) · ETF - Emerging Market Equities

$60.77

+5.14% this month

Scoreboard verdict

Across expense ratio, momentum, yield, fund size, risk

SPEM

3

VWO

2

SPEM LEADS 3/5

Comparison scoreboard

SPEM LEADS 3/5

Exp. Ratio

SPEM 0.07%

VWO ✓0.06%

1Y Return

SPEM ✓+30.61%

VWO +29.89%

Div. Yield

SPEM ✓2.48%

VWO 2.43%

AUM

SPEM $17.97B

VWO ✓$162.82B

Beta

SPEM ✓0.61

VWO 0.62

Metrics last refreshed: 6/20/2026

Quick take

SPEM vs VWO ETF Comparison: AI Score, Valuation, Performance and Upside

SPEM and VWO are nearly identical low-cost emerging market equity ETFs with the primary differentiator being index methodology: SPEM uses the S&P Emerging BMI Index (which includes South Korea as EM), while VWO uses the FTSE Emerging Markets index (which classifies South Korea as developed, excluding it from VWO). Both provide broad EM equity exposure dominated by China, India, Taiwan, and other developing economies. VWO has significantly more AUM and trading liquidity; SPEM's S&P index includes South Korean technology companies.

SPEM vs VWO is an emerging market equity comparison where the dominant practical difference is South Korea inclusion (SPEM's S&P EM index includes Samsung and SK Hynix alongside China, India, Taiwan exposure) versus Korea exclusion (VWO's FTSE EM index treats Korea as developed, with larger China and India weights as a result) — both are ultra-low-cost EM equity ETFs with VWO holding the liquidity advantage and SPEM providing broader EM definition coverage.

Live analysis · updated 6/20/2026

SPEM holds the edge across 3 of 5 key metrics in this comparison. SPEM has delivered stronger 1-year price return (+30.61% vs +29.89% for VWO).

Normalized 1Y performance

SPEM

VWO

Recent returns

SPEM

VWO

Who should consider this stock?

SPEM may suit investors who:

→Use a SPDR Portfolio ETF model portfolio (SPLG for U.S. equities, SPDW for international developed, SPEM for EM, SPFB or SPAB for bonds) and want consistent SPDR branding across all asset class allocations
→Want South Korean technology company exposure within their EM allocation — SPEM's S&P EM classification includes Samsung Electronics and SK Hynix, which VWO excludes
→Are also using SPDW for international developed market allocation, creating a clean geographic split — SPDW covers non-U.S. developed (including South Korea per FTSE) while SPEM covers EM (also including South Korea per S&P EM definition, though this creates potential overlap with SPDW)

VWO may suit investors who:

→Want the largest, most liquid EM equity ETF with Vanguard's brand recognition and cost-minimization philosophy — VWO's AUM advantage creates the tightest bid-ask spreads in EM ETF trading
→Use Vanguard ETFs across asset classes (VTI + VEA + VWO + BND — the classic Vanguard four-fund or three-fund portfolio), with VEA covering developed international including South Korea and VWO covering EM excluding South Korea for clean FTSE-based geographic coverage
→Value consistency with Vanguard's FTSE-based international equity methodology where VEA + VWO = VXUS total international (the comprehensive non-U.S. exposure decomposed by development status)

Performance & AI score

Metric	SPEM	VWO
ETF score	74.0	83.0
Latest close	$53.08	$60.77
1M return	+5.30%	+5.14%
6M return	+16.94%	+16.77%
1Y return	+30.61%	+29.89%

$10,000 invested — hypothetical growth (dividends reinvested)

How much would $10,000 be worth today if invested at the start of each period, with all dividends reinvested?

Period	SPEM	VWO
1Y ago	$13.45K (+34.5%) started 2025-06-18	$13.37K (+33.7%) started 2025-06-18
5Y ago	$16.04K (+60.4%) started 2021-06-18	$15.83K (+58.3%) started 2021-06-18
10Y ago	$32.76K (+227.6%) started 2016-06-20	$32.79K (+227.9%) started 2016-06-20

Hypothetical — past performance does not guarantee future results.

Fund characteristics

Metric	SPEM	VWO
Expense ratio	0.07%	0.06%
Total assets (AUM)	$17.97B	$162.82B
Dividend yield	2.48%	2.43%
Trailing P/E	17.02	17.16
Beta	0.61	0.62
52-week change	30.61%	29.89%

Risk & fund metrics

Metric	SPEM	VWO
1Y return	+30.61%	+29.89%
6M return	+16.94%	+16.77%
1M return	+5.30%	+5.14%
1Y Sharpe ratio	1.42	1.39
Beta	0.61	0.62
Dividend yield	2.48%	2.43%
5Y CAGR	+6.46%	+5.88%

Drawdown & downside risk

Lower drawdown and smaller single-period drops generally indicate a smoother ride, though they do not guarantee lower future risk.

1Y risk snapshot

SPEM max drawdown11.36%

VWO max drawdown11.17%

SPEM max wkly drop6.28%

VWO max wkly drop6.25%

5Y risk snapshot

SPEM max drawdown31.75%

VWO max drawdown32.60%

SPEM max wkly drop12.17%

VWO max wkly drop12.16%

10Y risk snapshot

SPEM max drawdown36.06%

VWO max drawdown36.39%

SPEM max wkly drop17.09%

VWO max wkly drop17.93%

Performance metrics by period

Period	Metric	SPEM	VWO
1Y	Growth	+30.61%	+29.89%
	CAGR	+30.63%	+29.91%
	Sharpe ratio	1.42	1.39
	Max drawdown	11.36%	11.17%
	Max daily drop	4.04%	3.78%
	Max wkly drop	6.28%	6.25%
5Y	Growth	+36.73%	+33.04%
	CAGR	+6.46%	+5.88%
	Sharpe ratio	0.19	0.16
	Max drawdown	31.75%	32.60%
	Max daily drop	5.69%	5.60%
	Max wkly drop	12.17%	12.16%
10Y	Growth	+149.23%	+135.75%
	CAGR	+9.57%	+8.96%
	Sharpe ratio	0.34	0.31
	Max drawdown	36.06%	36.39%
	Max daily drop	11.36%	12.09%
	Max wkly drop	17.09%	17.93%

Fund overview

Category	SPEM	VWO
Fund name	State Street SPDR Portfolio Emerging Markets ETF	Vanguard Emerging Markets Stock Index Fund
Type	ETF	ETF
Expense ratio	0.07%	0.06%
Total assets (AUM)	$17.97B	$162.82B
Dividend yield	2.48%	2.43%

SPEM strengths

→Ultra-low expense ratio competitive with VWO — SPEM's expense ratio competes directly with VWO; State Street's SPDR Portfolio ETF series is explicitly designed for cost competition with Vanguard
→S&P EM index includes South Korea — the S&P Emerging Markets index includes South Korea as an EM market; this gives SPEM exposure to Samsung Electronics, SK Hynix, and other Korean technology companies that VWO excludes (VWO uses FTSE which classifies South Korea as developed)
→Broad small-cap emerging market inclusion — SPEM includes small-cap EM stocks in addition to large and mid-cap; small-cap EM has historically provided exposure to more domestically-oriented EM companies versus the export-focused large caps

VWO strengths

→Largest and most liquid EM equity ETF — VWO's massive AUM makes it the most liquid EM equity ETF; institutional investors and financial advisors widely use VWO; tight bid-ask spreads minimize trading costs
→FTSE excludes South Korea from EM (South Korea is in FTSE developed) — investors using VEA + VWO together get total international coverage without South Korea overlap; investors using EFA (MSCI developed, excludes Korea) + VWO would have a gap
→Includes China A-shares for fuller China market exposure — VWO's China A-share inclusion gives exposure to mainland Chinese companies not available through Hong Kong-listed shares only (H-shares)

Risks to watch — SPEM

→China concentration creates single-country risk — China typically represents 25-30% of SPEM; changes in Chinese regulatory policy (tech sector crackdown, Alibaba and Didi regulatory actions), U.S.-China geopolitical tensions, and China's economic slowdown significantly impact SPEM performance
→EM currency weakness versus USD reduces USD returns — when EM currencies (Chinese yuan, Indian rupee, Brazilian real, South African rand) weaken against the dollar, SPEM's USD returns are reduced even if local stock prices rise
→Geopolitical and regulatory risks concentrated in EM — EM countries carry higher political risk than developed markets; government nationalization, capital controls, sanctions, and regulatory uncertainty are more common in EM than in developed markets

Risks to watch — VWO

→South Korea exclusion from VWO (in FTSE developed) means investors may need VEA + VWO to capture Korea — investors using iShares' EFA for developed international AND VWO for EM have a South Korea gap (not in MSCI developed, not in FTSE EM); investors using VEA + VWO have consistent FTSE-based Korea coverage
→China political risk is the dominant idiosyncratic risk — China's approximately 30% weight in VWO means Chinese regulatory actions, Taiwan Strait tensions, or U.S. restrictions on Chinese investments directly impact VWO
→VWO and SPEM have nearly identical portfolio overlap — both hold the same major EM countries (with S. Korea the key difference); the choice between them is primarily Vanguard versus SPDR brand preference

Frequently asked questions

Emerging market (EM) equities are stocks listed in developing economies — countries with lower per-capita income, less mature financial markets, and faster economic growth potential than developed markets. The largest EM countries by index weight: China — typically 25-35% of EM indices; includes Alibaba, Tencent, JD.com (Hong Kong-listed), BYD, CATL, Meituan, PDD Holdings (Pinduoduo), and thousands of domestic companies. India — approximately 15-20% and growing; includes Reliance Industries, HDFC Bank, Infosys, TCS, ICICI Bank, Bajaj Finance. Taiwan — approximately 15%; dominated by TSMC (Taiwan Semiconductor Manufacturing, the world's largest chip foundry). Brazil — approximately 5-7%; includes Petrobras (oil), Vale (mining), Itau Unibanco (bank), Embraer (aerospace). Saudi Arabia — approximately 4-6%; includes Saudi Aramco, Al Rajhi Bank. South Africa — South African banks and miners (Naspers — invested in Tencent). Mexico — FEMSA, Grupo Mexico, America Movil, Banorte. Indonesia, Thailand, Malaysia, Poland, Czech Republic — various EM countries with smaller weightings.

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