Key Highlights

  • HSBC MSCI Emerging Markets UCITS ETF (LSE:HMEF) is in focus as the dollar's slide after the US midterm elections improves conditions for emerging market assets.
  • The fund tracks the MSCI Emerging Markets Index, covering roughly 1,200 large and mid-cap companies.
  • Assets are in the region of US$2 billion to US$3 billion, with an ongoing charge of about 0.15%.
  • Semiconductors, China policy, Korean market swings and oil prices are key drivers.

Why the Fund Is in Focus

HSBC MSCI Emerging Markets UCITS ETF, listed on the London Stock Exchange as LSE:HMEF in sterling and LSE:HMEM in US dollars, is a low-cost UCITS route into emerging market equities that is popular with UK investors. It is trending after a turbulent stretch. The US dollar index fell to a five-week low after Democrats took control of Congress, a move widely seen as supportive for emerging market currencies and inflows. Yet Korean equities slumped in the days after the vote, and the late-October chip rout hit Taiwanese and Korean technology exporters, creating a tug of war that has dominated emerging market discussion.

Fund Objective and Benchmark

The fund aims to track the MSCI Emerging Markets Index, which covers large and mid-cap companies across 24 emerging economies and represents roughly 85% of the free float-adjusted Market Capitalisation in each. The fund uses physical replication with optimisation to manage costs across its broad universe.

Fund Size, Costs and Trading Lines

Assets are in the region of US$2 billion to US$3 billion. The ongoing charge of about 0.15% is among the lowest for UCITS emerging market funds. The fund is Irish-domiciled, and its London lines include LSE:HMEF and LSE:HMEM, with additional quotes for the same Share Class also available on the market.

Performance and NAV Total Return

Emerging markets have been volatile over the past year. Technology gains in Taiwan and Korea in the first half of 2026 were partly reversed in October, while Chinese stocks moved on policy headlines and India faced pressure from higher oil Import costs. The fund's approximate one-year NAV total return sits in the high single digits to low teens in sterling terms.

Income Profile and Indicative Yield

The fund distributes income, with an indicative trailing Yield of approximately 2.3% to 2.6%. Chinese banks, Taiwanese technology companies and resource producers in Brazil, Saudi Arabia and South Africa are major contributors.

Sector Allocation

Information technology is the largest sector at roughly 25%, followed by financials near 22% to 24% and consumer discretionary around 12%. Communication services accounts for roughly 9%, with materials, industrials, energy and consumer staples making up the rest.

Top Holdings

Taiwan Semiconductor Manufacturing Company is the largest holding at close to 10% of assets, followed by Tencent, Samsung Electronics, Alibaba, SK Hynix, HDFC Bank, Xiaomi and Reliance Industries. The top ten account for roughly a quarter of the portfolio.

Geographic Allocation

China is the largest market at roughly 25%, followed by Taiwan near 19% to 20%, India around 17% to 18% and South Korea near 11%. Brazil, Saudi Arabia and South Africa each account for roughly 3% to 4%, with smaller allocations to Mexico, Indonesia, Thailand, Malaysia and others.

Market Backdrop for Emerging Markets

The dollar's decline, falling Treasury yields after the midterms and hopes for US-Iran diplomacy have improved the outlook for emerging economies. However, the Federal Reserve held rates with two members voting for an increase, leaving the risk of tighter US policy. Technology concentration in Asia means AI sentiment has an outsized influence on returns.

Investor Sentiment

UK investors frequently discuss the fund as a low-cost alternative to larger emerging market trackers. Recent conversations have centred on whether the dollar's weakness marks the start of a longer emerging market cycle, and on comparisons with FTSE-based funds that exclude Korea.

Fund Structure

The fund is part of HSBC's low-cost index range and is Irish-domiciled, which generally offers favourable Withholding tax treatment on dividends from many emerging markets compared with some other domiciles. UK reporting fund status simplifies tax treatment for UK investors holding it outside ISAs and SIPPs.

How the Fund Fits in a Portfolio

HSBC MSCI Emerging Markets UCITS ETF (LSE:HMEF) is commonly used as the emerging market component of a global portfolio within ISAs and SIPPs, complementing developed market funds. Its low cost makes it attractive for long-term holders.

Key Risks to Consider

Concentration in Asian technology stocks exposes the fund to chip-cycle swings. China policy, US-China trade tensions and geopolitical risks remain significant. High oil prices weigh on energy importers, and currency Volatility affects returns for sterling-based investors.

What Investors Can Watch Going Forward

Key markers include the dollar's direction, the Fed's December decision, China's economic data and stimulus measures, India's inflation, Korea's market recovery and semiconductor demand. Fund flows into emerging markets often signal early shifts in sentiment.