Emerging market stocks aren’t typically popular in “risk off” environments for investors. As the term implies, these regions are not quite as advanced in their economic journey as nations like the U.S., Germany or Japan. That means a lot more can go wrong if and when global growth trends hit a snag.
That said, it’s undeniable that emerging markets hold tremendous potential despite their risks. In fact, while the broader stock market was falling apart in 2022, it was the emerging market of Turkey that stood tall. Specifically, the iShares MSCI Turkey ETF (ticker: TUR) nearly doubled during a year when the S&P 500 index lost about 20%.
This is not to say that emerging markets always outperform. But it proves that even in a choppy environment, a tactical bet on fast-growth stocks across Asia, South America or elsewhere could pay off.
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What to Know About Emerging Market Stocks
As a foundational point, it’s important to acknowledge up front that there are some big differences between emerging market stocks and the blue chips you may be most familiar with. Here are some things to think through:
Be careful trading over-the-counter, or OTC, stocks. It’s not uncommon to find emerging market stocks are not listed on U.S. exchanges like the NYSE and instead trade “over the counter.” Without a big exchange to back them, these stocks can sometimes trade infrequently and see their share price distorted by swings in volume as a result. Always check the average daily volume on any OTC stock before just placing a market order and risk getting filled at a bad price and the wrong time. Don’t worry though, the stocks in this list are not traded OTC.
Research thoroughly. It’s also worth noting that many emerging market stocks also lack the same oversight of domestic companies under the authority of the U.S. Securities and Exchange Commission. If a stock is headquartered overseas, it may only report its numbers once a year instead of quarterly. Furthermore, it may not even be required to disclose figures you are used to hearing about regularly in U.S. corporate earnings. Popular emerging market stocks voluntarily try to connect with overseas investors by doing more, but smaller stocks can be riskier because of a lack of information.
Consider alternatives. The aforementioned Turkey ETF shows there are ways to gain exposure to emerging markets without buying stocks directly. Maybe it’s a diversified exchange-traded fund, or ETF, like this one. Or maybe it’s a multinational company like Caterpillar Inc. (CAT) that does a huge business in China and, in many ways, is as exposed to growth trends there as local industrials are. Given some of the friction with emerging markets, these more indirect or diversified alternatives may be a good fit for many investors.
Now, with those disclaimers out of the way — and the normal word of warning about doing your own research and only investing in stocks that fit your personal risk-profile and investing goals — here are seven EM names to consider:
| Stock | Country |
| Alibaba Group Holding Ltd. (BABA) | China |
| ICICI Bank Ltd. (IBN) | India |
| Sigma Lithium Corp. (SGML) | Brazil |
| Trip.com Group Ltd. (TCOM) | China |
| Coca-Cola FEMSA (KOF) | Mexico |
| ASE Technology Holding Co. Ltd. (ASX) | Taiwan |
| Vale SA (VALE) | Brazil |
Best China Stock: Alibaba Group Holding Ltd. (BABA)
While it has fallen on hard times in the last few years, Alibaba has stabilized and is looking strong in 2023 despite challenges in the broader global economy. For starters, the “zero COVID” policies in China are loosening, meaning a potential upswing across the board for spending. As the leading e-commerce platform in the nation, that naturally will lift BABA stock. And as it’s trading at levels not seen since 2015, the stock may now be too cheap to pass up.
But furthermore, like Amazon.com Inc. (AMZN) there is also a brisk cloud business behind BABA that will help it ride broader enterprise spending beyond just retail sales growth in the region. That makes it a company that’s hard to overlook even if shares are down over the last few years.
Best India Stock: ICICI Bank Ltd. (IBN)
Looking beyond the economic superpower of China, India also deserves notice as the largest democracy in the world. Mumbai-based ICICI Bank is one of the largest financial institutions in the nation, and thus well-positioned to capitalize on any economic growth in the region. Beyond just traditional banking and lending, it provides life insurance, credit card services, investment banking and pension services.
This stock is up about 15% in the last 12 months while the S&P 500 has moved roughly the same amount in the opposite direction. That’s in part because GDP forecasts for India are running at 5.5% growth this year and another 6.5% in 2024. There’s no guarantee those predictions will hold but, if they do, ICICI should continue to outperform.
Best Brazil Stock: Sigma Lithium Corp. (SGML)
Looking to other emerging markets, Brazil is a top 10 global economy as ranked by national GDP. In fact, its economic output is larger than Canada’s and, like Canada, Brazil is dependent on its resource-rich lands and the related commodities it extracts.
But, looking forward, in the age of global warming it may not be wise to bet on coal or oil companies. Instead, the best Brazil stock right now is Sigma Lithium — a materials company that specializes in the battery metal used in electric vehicles, smartphones and other high-tech devices. SGML stock has more than doubled in the last 12 months as it rides this lithium megatrend, and should continue to see strong demand regardless of environmental policies around the world.
[SEE: 7 Dividend Stocks to Buy and Hold Forever]
Other Top Emerging Market Stocks
Trip.com Group Ltd. (TCOM). Trip.com is a travel-oriented stock based out of Shanghai, not unlike the English-language online booking services you may use. The company is predicting a 70% surge in revenue this year as it recovers from the travel crackdowns of the prior years, but keep in mind that this may only put it back to where it was around 2018. There could be long-term growth in store, and some investors have bid shares up more than 60% in the last 12 months on optimism. But this cyclical emerging market play is definitely spicier than some of the others on this list.
Coca-Cola FEMSA (KOF). Mexico-based KOF is a franchise bottler that produces, markets, sells, and distributes Coca-Cola trademark beverages in the region. Shares are up about 50% in the last year as Mexico’s economy grew faster than expected in 2022 and kicked off 2023 on the right foot with a more than 4% growth rate in January. KOF is more stable than some other emerging market stocks as it is fundamentally a consumer staples company, so this combination of big-picture stability and short-term momentum could make it worth a look.
ASE Technology Holding Co. Ltd. (ASX). ASE is not a China stock, as it is headquartered in neighboring Taiwan, but it does have deep relationships with mainland China as well as the rest of the APAC tech sector. Given the supply-chain disruptions of the last few years, ASX has been quite volatile. But shares recently hit their highest level since the fall of 2021 on optimism over chip demand and pricing power, putting this stock up more than 20% in the last year and up about 70% from its recent lows.
Vale SA (VALE). Brazilian megaminer Vale is a major player in iron as well as nickel, gold, cobalt, silver and other metals. This stock is fundamentally a play on raw materials, which means if we see a cyclical recovery it will do quite well. Furthermore, it’s also a play on hard assets, so if we see inflationary pressures persist then it could command good margins as metal prices rise. That said, there’s definitely risk here as higher interest rates could undercut both economic growth as well as inflationary pressures.
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7 of the Best Emerging Market Stocks to Buy originally appeared on usnews.com
Update 03/30/23: This story was previously published at an earlier date and has been updated with new information.
