For decades, China has been the dominant driver of emerging market investing. Today, we believe investors can access many of the asset class’s most compelling growth opportunities without taking significant exposure to China. 

The Columbia EM Core ex-China ETF (ticker: XCEM) offers exposure to many of the world’s fastest-growing economies while excluding China. We believe this exclusion strengthens the investment case, as China faces ongoing structural economic challenges, regulatory uncertainty, and heightened geopolitical risks. Instead, XCEM provides access to countries benefiting from supply chain diversification, accelerating AI investment, and rising consumer demand across developing markets. We added XCEM to complement our holding in the Vanguard Emerging Markets Stock Index Fund ETF (ticker: VWO), which has a ~23% weighting to China, allowing us to maintain broad emerging market exposure while systematically reducing overall Chinese market risk. 

One of the fund’s most compelling attributes is its exposure to the companies powering the AI revolution. While much of the market’s attention has centered on U.S. software and hyperscale companies, many of the world’s most important semiconductor manufacturers are based in emerging markets. Holdings such as Taiwan Semiconductor, Samsung Electronics, SK Hynix, and MediaTek are global leaders in advanced chip manufacturing, memory, and semiconductor design. These companies build the essential hardware powering artificial intelligence, cloud infrastructure, smartphones, and millions of connected devices worldwide.

Beyond technology, the global manufacturing landscape continues to evolve. Companies are increasingly diversifying production away from China in response to geopolitical tensions, supply chain disruptions, and national security concerns. Countries including India, Taiwan, South Korea, and Vietnam have emerged as key beneficiaries, attracting investment and expanding their roles in global manufacturing. We believe these trends remain in the early stages and should continue to support long-term economic growth.

India is a particularly attractive component of the portfolio. With one of the world’s fastest-growing major economies, favorable demographics, increasing infrastructure investment, and a rapidly expanding middle class, India is well positioned to become a larger driver of global economic growth over the coming decade. 

Of course, investors should recognize the risks. Emerging markets are inherently more volatile than developed markets and can experience periods of heightened political and economic uncertainty. In addition, semiconductor companies operate in a cyclical industry where demand, pricing, and profitability can fluctuate over time. 

Despite these risks, we believe XCEM provides an attractive way to access several attractive secular investment themes through a single investment vehicle. The fund combines exposure to leading semiconductor companies, beneficiaries of global supply chain diversification, and some of the world’s fastest-growing economies, while reducing overall direct exposure to China. For long-term investors seeking diversified international growth, we believe XCEM is well positioned to benefit from the next phase of emerging market leadership. 

The opinions expressed in this video are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual. It is only intended to provide education about the financial industry. As always, please remember that investing involves risk of loss of principal and capital. Nelson Capital Management, LLC is a registered investment adviser with the U.S. Securities and Exchange Commission. Advisory services are only offered to clients or prospective clients where Nelson Capital Management, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Nelson Capital Management, LLC unless a client service agreement is in place. Likes and dislikes are not considered an endorsement for our firm.