Emerging market stocks to buy offer access to fast-growing economies and global growth drivers. These economies are projected to grow over 4% this year, compared to just 2% for developed economies. This growth, combined with attractive valuations, underscores the potential for portfolio diversification in emerging markets.
One key concern is how moves in foreign exchange rates could impact investment returns. For U.S.-based investors, a potential decline in the U.S. dollar (USD) typically benefits emerging market exchange-traded stocks. Thus, with the recent slight weakening of the dollar and potential Federal Reserve rate cuts, these markets present an opportune investment landscape.
So, let’s delve into three top emerging market stocks to buy in the second half of 2024.
Alibaba (BABA)
First on our list is Alibaba (NYSE:BABA). The Chinese e-commerce giant operates various online platforms and services, positioning itself as a dominant force in China’s digital economy, ripe with growth potential.
In mid-May, Alibaba posted its fourth-quarter fiscal 2024 results. Revenue increased 7% year-over-year (YOY). However, adjusted diluted earnings per share (EPS) declined 5% from the prior year, due to higher operational expenses from new initiatives and macroeconomic challenges. Nevertheless, Alibaba still returned money to shareholders through stock buybacks and dividends.
Beyond capitalizing on China’s growth and global expansion, Alibaba prioritizes advancing its technological prowess, specifically in generative artificial intelligence (AI). Its recent collaboration with the high-end retailer LVMH Moët Hennessy (OTCMKTS:LVMHF) aims to elevate China’s luxury shopping experience by leveraging Alibaba’s cloud technologies and AI for personalized customer interactions. Furthermore, China’s proposed regulations to bolster overseas warehouse construction and augment cross-border e-commerce present promising avenues for additional growth.
In addition to a modest gain of 1% year-to-date (YTD), BABA stock offers a 1.3% dividend yield. The shares trade at attractive valuations of 9.5 times forward earnings and 1.5 times sales. Analysts hold optimistic forecasts with a 12-month median price target of $106, suggesting a 35% upside potential.
Infosys (INFY)
Next on the list is Infosys (NYSE:INFY), the India-headquartered digital services and consulting heavyweight. The global company provides a wide array of services, including consulting, technology, outsourcing, and next-generation digital solutions.
In April, Infosys unveiled its fourth-quarter and full-year 2024 results, reporting flat quarterly revenue growth at $4.6 billion. Earnings per diluted share were 23 cents, up 28.8% YOY. For fiscal year 2025, Infosys projects cautious revenue growth of 1-3% in constant currency terms. Nonetheless, the company is proactively enhancing its offerings through strategic partnerships and acquisitions.
Notably, collaborations with Nihon Chouzai, which aim to enhance healthcare access in Japan, could enable remote consultations and online payments with pharmacists. Additionally, a partnership with the French Tennis Federation introduced AI-powered features in the Roland Garros tournament in recent weeks, enhancing spectator experiences.
So far this year, INFY stock has declined nearly 3%, but offers an attractive 2.5% dividend yield. The shares are changing hands at 23.2 times forward earnings and 4 times sales. Analysts project a 12-month median price forecast of $19.3, signaling more than an 8% upside.
iShares MSCI Emerging Markets ex China ETF (EMXC)
Our final pick among emerging market stocks to buy is the iShares MSCI Emerging Markets ex China ETF (NASDAQ:EMXC). This exchange-traded fund gives access to large and mid-cap emerging market stocks, excluding those from China. The fund began trading in August 2017.
EMXC holds 704 stocks, with the top ten accounting for nearly 25% of its $13.5 billion net assets. The fund’s sector allocation is diverse, focusing on Information Technology (30%) and Financials (24%), along with Materials (8%), Industrials (8%), and Consumer Discretionary (7%). In terms of geographical distribution, assets are invested in India (26%) and Taiwan (25%). Other significant investments include South Korea (16%), Brazil (6%), and Saudi Arabia (5%).
Among the ETF’s leading holdings are Taiwan Semiconductor Manufacturing (NYSE:TSM), South Korean chip giant Samsung Electronics (OTCMKTS:SSNLF), Indian multinational conglomerate Reliance Industries (OTCMKTS:RLNIY), South Korean semiconductor group SK Hynix (OTCMKTS:HXSCF), and Taiwan-based electronics maker Hon Hai Precision Industry (OTCMKTS:HNHPF).
YTD, EMXC has gained almost 5%. The ETF is attractively valued, trading at 16 times trailing earnings and 2 times book value. Additionally, it boasts a relatively low expense ratio of 0.25% and offers a 2% dividend yield.
On the date of publication, the writer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer.
