SPDR S&P Emerging Markets ex-China ETF (XCNY): A Dividend-Fueled Buy Signal Amid Undervalued Opportunities

The SPDR S&P Emerging Markets ex-China ETF (XCNY) has quietly emerged as a compelling opportunity for investors seeking dividend growth and exposure to undervalued emerging markets outside of China. With a recent dividend hike, a price hovering near net asset value (NAV), and strategic allocations to high-growth sectors like technology and finance, XCNY presents a rare confluence of income potential and valuation upside. Let's dissect why this ETF could be a standout performer in 2025.

Dividend Growth Signals Resilience in a Challenging Market

XCNY's most recent dividend distribution of $0.2847 per share on June 27, 2025, marks a 10.49% increase from its December 2024 payout. While its trailing 12-month dividend yield of 0.36% appears modest, this figure understates the fund's true income potential. The 30-Day SEC Yield, a more reliable measure of yield for ETFs, stood at 2.22% as of November 2024, significantly higher than the fund's quoted yield. This discrepancy arises because the SEC yield accounts for expenses and assumes dividend consistency, whereas the trailing yield reflects only recent payouts.

Investors should also note XCNY's semiannual distribution schedule, which aligns with many emerging markets' corporate payout cycles. The June 2025 increase underscores the fund's ability to capture dividend growth in regions like Taiwan, India, and Southeast Asia, where companies are expanding profits amid robust tech adoption and financial sector modernization.

Valuation: Near NAV, Below Historical Lows

XCNY's current market price of $25 (as of June 23, 2025) sits just above its $24.46 NAV as of November 2024, with no significant premium or discount observed in recent months. Crucially, the fund's price has flirted with its June 2025 low of $24.41, hitting this trough on June 4 before rebounding slightly. This proximity to NAV creates a low-risk entry point, as deviations from NAV typically mean-revert over time.

While the fund's trading volume remains thin (averaging ~1,000 shares daily in June 2025), its structure as an ETF ensures liquidity through arbitrage mechanisms. For long-term investors, this volatility could be a blessing in disguise, allowing them to accumulate shares at or below NAV.

Excluding China: A Strategic Edge in Emerging Markets

XCNY's exclusion of Chinese equities is its defining feature. By focusing on markets like Taiwan, India, and Brazil—regions often overlooked in broader emerging markets funds—the ETF avoids the regulatory risks and geopolitical headwinds plaguing China's economy. This strategy also tilts the portfolio toward high-growth sectors:

• Technology (25.52% of assets): Heavyweights like Taiwan Semiconductor Manufacturing (TSM), a global leader in semiconductor fabrication, benefit from AI-driven demand and U.S.-Asia supply chain reshoring.
• Financials (24.24%): Institutions like HDFC Bank (India) and Siam Commercial Bank (Thailand) are capitalizing on digital banking adoption and rising consumer credit demand in fast-growing economies.

These sectors are underrepresented in China-centric ETFs, making XCNY a pure play on secular growth stories in tech and finance.

Risks and Considerations

No investment is without risk. XCNY's concentration in emerging markets exposes it to currency fluctuations, political instability, and interest rate sensitivity. The fund's expense ratio of 0.15% is low, but its small asset base ($4.89 million as of November 2024) could amplify volatility. Investors should pair XCNY with broader market hedges or diversify across regions.

The Buy Case: Yield, Valuation, and Growth Converge

XCNY checks three critical boxes for income-focused and growth investors alike:

1. Income Potential: The SEC yield of 2.22% offers better income prospects than many Nasdaq stocks, especially in a low-yield environment.
2. Undervalued Pricing: With shares near NAV and historical lows, the risk-reward favors buyers.
3. Sector Tailwinds: Tech and financials in Asia-Pacific and Latin America are primed for expansion, driven by digitization and rising middle classes.

Action Item: Investors seeking emerging markets exposure without overexposure to China should consider a gradual accumulation of XCNY, particularly on dips below $25. Pair this with a 6–12-month holding period to capture both dividend growth and NAV-driven price appreciation.

In a world where China's markets dominate headlines, XCNY quietly offers a path to outperformance by focusing on the next wave of economic winners. This ETF's blend of income, valuation, and sector-specific upside makes it a standout option for 2025.