The iShares MSCI Emerging Markets ETF (EEM) is one of the largest and most widely traded vehicles for accessing emerging markets. With more than $20 billion in assets under management, it tracks the MSCI Emerging Markets Index, which covers large- and mid-cap companies across Asia, Latin America, Eastern Europe, the Middle East, and Africa. For investors seeking diversification outside the U.S., EEM offers broad exposure to economies that often grow faster than those in developed markets.
| Rank | Ticker | Company | % of Fund |
|---|---|---|---|
| 1 | TSM | Taiwan Semiconductor Manufacturing Co Ltd | 10.65% |
| 2 | 0700.HK | Tencent Holdings Ltd | 5.48% |
| 3 | BABA | Alibaba Group Holding Ltd | 3.63% |
| 4 | 005930.KQ | Samsung Electronics Co Ltd | 2.79% |
| 5 | 000660.KQ | SK Hynix Inc | 1.43% |
| 6 | XIACY | Xiaomi Corp Class B | 1.29% |
| 7 | HDB | HDFC Bank Ltd | 1.29% |
| 8 | RELIANCE.NS | Reliance Industries Ltd | 1.00% |
| 9 | CICHY | China Construction Bank Corp Class H | 0.98% |
| 10 | PDD | PDD Holdings Inc ADR | 0.95% |
| 11 | HHPD | Hon Hai Precision Industry Co Ltd | 0.91% |
| 12 | IBN | ICICI Bank Ltd | 0.87% |
| 13 | 2454.TW | MediaTek Inc | 0.75% |
| 14 | 3690.HK | Meituan Class B | 0.70% |
| 15 | INFY | Infosys Ltd | 0.60% |
| 16 | 2308.TW | Delta Electronics Inc | 0.59% |
| 17 | BHARTIARTL.NS | Bharti Airtel Ltd | 0.59% |
| 18 | NPN.JO | Naspers Ltd Class N | 0.57% |
| 19 | NU | Nu Holdings Ltd Class A | 0.57% |
| 20 | BYDDF | BYD Co Ltd Class H | 0.56% |
| 21 | NTES | NetEase Inc | 0.55% |
| 22 | 1120.SE | Al Rajhi Bank | 0.51% |
| 23 | IDCBY | Industrial & Commercial Bank of China Ltd Class H | 0.51% |
| 24 | TCOM | Trip.com Group Ltd | 0.50% |
| 25 | PNGAY | Ping An Insurance Co of China Ltd Class H | 0.48% |
EEM is popular because it provides a one-stop shop for exposure to emerging markets. Its fee structure is higher than broad U.S. ETFs, but still accessible given the complexity of building such a portfolio on your own. Investors often use it as a tactical satellite position to complement U.S.-heavy core holdings, betting on the long-term rise of Asia, Latin America, and other growth markets.
What’s striking about EEM is its concentration, despite its global reach. The top 10 holdings account for approximately one-third of the portfolio, and the top 25 holdings collectively drive a significant portion of the returns. Taiwan Semiconductor (TSMC), Tencent, and Alibaba dominate the fund, meaning that performance in emerging markets often mirrors how these few companies trade.
1. Taiwan Semiconductor (2330)
TSMC is the backbone of the global semiconductor industry. As the world’s leading contract chipmaker, it manufactures advanced semiconductors for companies like Apple, NVIDIA, and Qualcomm. Its dominance in 3nm and 5nm production gives it a near monopoly on cutting-edge chips, which are critical for everything from AI to smartphones.
Financially, TSMC’s margins are the envy of the industry. It consistently posts gross margins of more than 50%, driven by its scale and pricing power. With capital expenditures (capex) often exceeding $30 billion annually, the company is reinvesting heavily to maintain its lead, while simultaneously expanding fabs in the U.S. and Japan to diversify production beyond Taiwan.
For EEM investors, TSMC is both a strength and a risk. Its sheer weight (over 10% of the ETF) means EEM’s performance is closely tied to global chip demand. When semiconductor stocks rally, the EEM often outperforms broad emerging-market indexes. However, geopolitical risks surrounding Taiwan loom large, adding volatility to the long-term narrative.
2. Tencent Holdings (700)
Tencent is China’s internet titan, best known for its super-app WeChat, which combines messaging, payments, gaming, and social media in one ecosystem. With more than a billion users, WeChat anchors Tencent’s advertising and fintech businesses, while its gaming division is one of the largest in the world.
Revenue streams are highly diversified, social networks, cloud, fintech, and entertainment each make meaningful contributions. Tencent also has a strong venture portfolio, holding stakes in companies like Tesla, Pinduoduo, and various global game studios. That makes it not just a Chinese consumer play, but also a global tech investor.
In EEM, Tencent provides exposure to China’s digital economy, but investors need to weigh regulatory headwinds. Chinese government crackdowns on gaming and fintech have dented growth at times. Still, Tencent’s entrenched position in daily life makes it one of the stickiest platforms in the world, and a long-term driver of EEM’s returns.
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3. Alibaba Group (9988)
Alibaba is often referred to as the “Amazon of China,” but that term undersells its reach. Beyond e-commerce platforms like Taobao and Tmall, Alibaba runs a global cloud division, logistics operations, and payments infrastructure through Ant Group. Its e-commerce marketplace still processes over $1 trillion in gross merchandise volume annually.
The challenge has been regulatory pressure. Ant Group’s halted IPO, tighter restrictions on platform companies, and competitive threats from Pinduoduo and JD.com have weighed on growth. However, Alibaba is currently restructuring into six separate business groups, unlocking potential value and making each unit more agile.
For EEM investors, Alibaba is a swing factor. When China’s consumer economy recovers, Alibaba benefits disproportionately. When sentiment sours on Chinese equities, it drags. With a 3.6% weight, it’s not as dominant as TSMC or Tencent, but still a top-three holding that shapes EEM’s trajectory.
Why EEM Is Ripe for Investment
EEM’s top 25 holdings show how emerging-market investing is less about hundreds of small companies and more about a handful of giants. TSMC, Tencent, and Alibaba alone make up nearly 20% of the fund, meaning EEM’s performance is tied to the fortunes of semiconductors and Chinese tech. That concentration explains why the ETF often trades more like an Asia-focused growth fund than a broad global basket.
At the same time, smaller positions in banks, insurers, energy companies, and telecoms across India, Brazil, and the Middle East add diversification. They provide ballast when tech is volatile, giving EEM a broader base than just “China plus chips.”
Key Insights
- Concentration in Asian tech: Despite spanning multiple regions, Asia, particularly Taiwan and China, dominates the fund, with semiconductors and internet platforms serving as key drivers of performance.
- Geopolitical risk premium: Exposure to Taiwan, China, and other emerging economies means returns can fluctuate based on geopolitical developments, regulatory changes, and global trade dynamics.
- Diversified ballast: Smaller weights in banks, insurers, and energy firms across India, Brazil, and the Middle East help offset volatility in tech-heavy names.
How Taiwan and China Drive Emerging Market Returns
The iShares MSCI Emerging Markets ETF (EEM) remains one of the most efficient ways to gain exposure to emerging markets. Its strengths are clear: access to global growth stories like TSMC, Tencent, and Alibaba, alongside diversified holdings in financials, energy, and consumer goods across dozens of countries.
But investors should recognize the risks. Geopolitics, regulation, and currency fluctuations can all significantly impact performance, more so than in developed-market ETFs. EEM’s concentration in a few names also means it doesn’t always deliver the “broad” diversification its 1,000+ holdings suggest.
For long-term investors, EEM provides a way to participate in the structural growth of emerging markets. As technology adoption, rising incomes, and infrastructure spending reshape these economies, EEM gives you a front-row seat. Just be prepared for more volatility, and understand that performance is driven most by a select few leaders.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
