By Pritu Makan
Investment strategy
The index offers broad exposure to high-growth economies across regions such as Asia, Latin America, the Middle East, and Africa,
spanning sectors from technology and financials to consumer discretionary and energy, making it a diversified vehicle for gaining
emerging market exposure.
Advantages
- Clients benefit from the flexibility of an exchange-traded investment which provides access to this segment of the market with a single transaction, bypassing the administrative and cost hurdles of direct offshore investment.
- Emerging-market economies often grow faster than developed ones due to demographic profiles (younger working-age populations), rapid urbanisation, and industrialisation.
- The instrument provides exposure to a broad spectrum of sectors and countries, enhancing diversification benefits.
- Emerging-market stocks remain undemanding relative to developed peers, offering an attractive entry point for capital appreciation as and when global financial markets get back to business as usual.
- Emerging markets are increasingly central to global supply chains and digital transformation, offering exposure to long-term structural growth themes.
Risks
- The strategy is fully exposed to emerging market equities and their inherent risks (including currency fluctuations, geopolitical uncertainty, and varying regulatory environments), which means that returns could be volatile, and capital drawdown is a risk.
- The index is heavily weighted towards a few large economies (Taiwan and China being the two largest regions) and a few sectors (Information technology being the biggest exposure), meaning a downturn in one region/sector can disproportionately affect the entire fund.
- There is also high stock-specific concentration risk with the top ten constituents making up ~34.6% of the index.
FNB Stockbroking and Portfolio Management View
- This ETN provides investors with a low-cost option to gain exposure to a broad spectrum of emerging-market equities. These developing markets tend to boast high growth potential and attractive valuations with structural opportunities and innovation providing further tailwinds.
- In terms of performance, the MSCI Emerging Markets Index has delivered a total return of ~47.5% over the trailing 12 months to April 2026, with a strong ~14.5% year-to-date contribution in 2026 alone, reflecting a sustained and broadening rally. The performance has been fuelled by AI-related demand lifting technology-heavy markets such as South Korea, commodity export tailwinds benefitting Latin American economies like Brazil, and a thawing in United States (US)-China trade relations.
- Despite the Middle East war initially raising fears of an energy shock to import-dependent emerging-market economies, markets proved resilient, with the MSCI Emerging Markets Index recovering to new all-time highs faster than the S&P 500. However, ongoing uncertainty surrounding the prolonged US-Iran peace talks remain a risk over the short term.
The FNB ETNs
FNB has a range of locally listed exchange-traded notes (ETNs) that track the performance of globally listed shares,
indices and funds. For example, FNB's Netflix ETNs (NFETNC and NFETNQ) track the performance of the US listed Netflix
share through an instrument listed on the JSE. If the Netflix share price increases so will the price of the local FNB Netflix
ETNs. By investing in the FNB Netflix ETNs you benefit from the movement of the global Netflix share without having to
take your money offshore or having to spend a large amount of money to buy a single share.
