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Schwab Emerging Markets Equity ETF

SCHE:NYSE

equity ETF | passive | Schwab | Tracks FTSE

Market Price

US$34.69 (26 Jan 2026)

+26.55% (YoY)

NAV

US$34.49

+0.58% Premium

Yield

2.87%

0.00% (YoY)

Expense Ratio

7.00%

-86% vs Avg: 50.00%

Box Set (ETF)

⚡ Executive Summary

📊 The Bottom Line

This ETF offers broad-based exposure to emerging market equities, tracking the performance of large and mid-capitalization companies in emerging market countries. With a highly competitive expense ratio and strong diversification, SCHE provides an efficient way to access this growth-oriented segment of the global market. Our bull case projects NAV reaching US$41.63 (+20%) while the bear case suggests US$29.49 (-15%) over the next 12-18 months.

⚖️ Risk vs Reward

Emerging market equities currently present a compelling risk-reward profile, trading at a P/E of 14.25x which is slightly above category averages, indicating fair pricing with growth potential. The sector has strong tailwinds from demographic trends and digitalization. However, the asset class remains susceptible to geopolitical risks, currency fluctuations, and policy changes in major emerging economies like China and India. Compared to developed markets, emerging markets offer higher growth potential but also carry elevated volatility. SCHE's low expense ratio mitigates some fund-specific drag, but the inherent risks of the underlying asset class remain a primary consideration for investors.

🚀 Why SCHE Could Soar

• Robust economic growth in key emerging markets like India and Southeast Asia could drive significant corporate earnings expansion.
• A weaker U.S. dollar typically benefits emerging market assets by making their exports more competitive and debt cheaper to service.
• Increased foreign direct investment and infrastructure spending in developing economies could accelerate growth and corporate profitability.

⚠️ What Could Go Wrong

• Escalating geopolitical tensions or trade disputes could disrupt global supply chains and dampen investor sentiment towards emerging markets.
• Significant slowdowns in major economies such as China, due to real estate issues or regulatory crackdowns, could negatively impact the index.
• Sudden strengthening of the U.S. dollar or rising interest rates could lead to capital outflows from emerging markets, pressuring asset prices.

🏢 Fund Overview

What Are You Actually Buying

The Schwab Emerging Markets Equity ETF (SCHE) provides diversified exposure to large and mid-capitalization companies located in emerging market countries, as defined by the FTSE Emerging Index.
This ETF invests primarily in stocks, encompassing hundreds of individual securities across more than a dozen diverse economies, with notable allocations to the financial and electronic technology sectors.
Unlike some peer indices, the FTSE Emerging Index tracked by SCHE does not classify South Korea as an emerging market, leading to a greater weighting in other key emerging economies such as China and India.

Market Dynamics & Outlook

Emerging markets are influenced by global economic cycles, commodity prices, and currency movements, offering a higher growth potential compared to developed markets.
Key drivers for this market include favorable demographic trends, increasing digitalization, and expanding middle classes in developing nations.
However, these markets are also sensitive to global interest rate changes and geopolitical events, which can introduce periods of heightened volatility.

🎯 Why This Matters

Understanding the dynamic nature of emerging markets is crucial as they offer compelling long-term growth prospects alongside distinct geopolitical and economic risks. The sector's current valuation needs to be considered in the context of these opportunities and challenges, making a diversified and cost-effective approach essential for investors.

📈 Valuation & Analysis

Historical Performance

YTD

+4.92%

+28.40%

Yearly Growth (3Y)

+15.09%

Yearly Growth (5Y)

+4.47%

Yearly Growth (10Y)

+8.31%

Yearly Growth (Since Inception)

+4.39%

Current Valuation

The Schwab Emerging Markets Equity ETF's underlying holdings currently trade at an aggregate price-to-earnings (P/E) ratio of 14.25x and a price-to-book (P/B) ratio of 2.02x, as of January 21, 2026. These metrics are slightly above the Morningstar category average P/E of 13.10x and in line with the index P/B of 2.00x, suggesting a fair, rather than undervalued or overvalued, market. The ETF offers a trailing twelve-month (TTM) distribution yield of 2.87%, which can be attractive to income-focused investors. While current valuations are not at extreme highs, they reflect a degree of optimism about future growth prospects in emerging economies.

The Bull Case - Upside to

Stronger-than-Expected Global Economic Recovery

Medium Probability

If global GDP growth surpasses current forecasts, particularly driven by robust demand from developed economies, emerging market exports could surge, boosting corporate earnings by 10-15% and potentially lifting the ETF's NAV by 15-20%.

Favorable Monetary Policies in Emerging Markets

Medium Probability

If central banks in key emerging economies maintain accommodative monetary policies or begin rate cuts, it could stimulate domestic demand, reduce borrowing costs for companies, and enhance equity valuations, contributing 5-10% upside to NAV.

Reduced Geopolitical Tensions and Trade Certainty

Low Probability

A de-escalation of global trade disputes and a more stable geopolitical environment could reduce risk premiums associated with emerging markets, attracting significant capital inflows and potentially adding 10-15% to the ETF's NAV.

The Bear Case - Downside to

Persistent Inflation and Aggressive Global Rate Hikes

Medium Probability

If inflation remains stubbornly high, forcing central banks globally (especially the U.S. Federal Reserve) to maintain or increase interest rates, it could trigger capital outflows from emerging markets, leading to currency depreciation and a 15-20% downside to the ETF's NAV.

Significant Economic Slowdown in China

Medium Probability

A severe downturn in China's economy, driven by ongoing real estate sector issues or unexpected policy shifts, could significantly impact emerging market demand and supply chains, potentially causing a 10-15% decline in the ETF's NAV.

Increased Geopolitical Instability

High Probability

Heightened geopolitical conflicts or a significant increase in political instability within major emerging economies could deter foreign investment and disrupt economic activity, resulting in a 10-15% reduction in the ETF's NAV.

Risk/Reward Assessment

The risk-reward assessment for SCHE is finely balanced, reflecting the inherent volatility and growth potential of emerging markets. The bull case hinges on a confluence of positive global economic factors, including a stronger-than-expected recovery and supportive monetary policies. If these tailwinds materialize, the diversified exposure of SCHE could capitalize on robust corporate earnings growth and expanding valuations. However, the bear case highlights significant vulnerabilities. Persistent global inflation leading to tighter monetary policies, a pronounced economic slowdown in China, or an escalation of geopolitical tensions could severely impact emerging market performance. Investors must weigh these potential upside catalysts against the considerable downside risks, particularly given the asset class's sensitivity to macroeconomic shifts and political events. The broad diversification within SCHE helps mitigate single-country or single-sector risks, but it does not eliminate the systemic risks associated with the emerging market universe.

Peer Comparison

SCHE distinguishes itself among its emerging market equity peers primarily through its exceptionally low expense ratio of 0.07%, making it one of the most cost-efficient options for broad emerging market exposure. This cost advantage can significantly enhance long-term returns, especially in an asset class where compounding fees can be substantial. The ETF also boasts a high number of holdings (over 2,100), providing extensive diversification across countries and companies, which helps in mitigating idiosyncratic risks. While its 1-year performance has been competitive, some peers with heavier technology tilts, like EEM, have shown higher returns in specific periods. However, SCHE's strategy of excluding South Korea from its emerging market definition may appeal to investors seeking more concentrated exposure to other developing regions like India and China.

Fund	Expense Ratio	AUM (B)	1Y Return	3Y Return	5Y Return	Yield
Schwab Emerging Markets Equity ETF (SCHE) ⭐	7.00%	US$12.1B	28.40%	15.09%	4.47%	2.87%
Vanguard FTSE Emerging Markets ETF (VWO)	7.00%	US$108.5B	25.58%	15.01%	4.70%	3.65%
iShares Core MSCI Emerging Markets ETF (IEMG)	9.00%	US$127.3B	29.15%	14.94%	5.86%	2.94%
iShares MSCI Emerging Markets ETF (EEM)	72.00%	US$25.1B	37.90%	15.64%	3.75%	2.20%
SPDR Portfolio Emerging Markets ETF (SPEM)	7.00%	US$16.5B	28.60%	15.64%	4.81%	2.72%

🎯 Why This Matters

The detailed valuation and peer analysis reveal that SCHE offers a highly competitive and diversified entry point into emerging market equities. Its low expense ratio is a significant advantage for long-term investors, although some peers may offer slightly different exposures or recent performance. Investors should consider their risk tolerance for emerging market volatility and their specific investment goals when choosing among these options.

📊 Appendix

Top 10 Holdings (80+ of ETF Value)

#	Ticker	Logo	Name	Sector	Weight
1	2330	T	Taiwan Semiconductor Manufacturing Co Ltd	Technology	13.5%
2	700	T	Tencent Holdings Ltd	Communication Services	4.7%
3	9988	A	Alibaba Group Holding Ltd Ordinary Shares	Consumer Cyclical	3.6%
4	500180	H	HDFC Bank Ltd	Financial Services	1.1%
5	500325	R	Reliance Industries Ltd	Energy	1.0%
6	939	C	China Construction Bank Corp Class H	Financial Services	0.9%
7	2317	H	Hon Hai Precision Industry Co Ltd	Technology	0.8%
8	532174	I	ICICI Bank Ltd	Financial Services	0.8%
9	PDD	P	PDD Holdings Inc ADR	Consumer Cyclical	0.8%
10	1810	X	Xiaomi Corp Class B	Technology	0.8%

Fund Mechanics

How It Works

The Schwab Emerging Markets Equity ETF (SCHE) operates as a passive fund designed to closely track the total return of the FTSE Emerging Index, before fees and expenses. This index is comprised of large and mid-capitalization companies located in emerging market countries, as defined by the index provider. The fund employs a representative sampling technique, meaning it invests in a selection of securities that collectively have investment characteristics and risk and return characteristics similar to those of the entire index. SCHE's investment policy mandates that under normal circumstances, at least 90% of its net assets are invested in these index stocks, including depositary receipts such as ADRs, GDRs, and EDRs. A distinctive feature of the FTSE Emerging Index, and consequently SCHE, is the exclusion of South Korea from its emerging market classification, which differentiates its country allocations from some other major emerging market indices. The index components are typically reviewed and rebalanced on a semi-annual basis, usually in March and September, to ensure it continues to accurately reflect the emerging market landscape.

Holdings Breakdown

Number of Holdings

2168

Top 10 Concentration

2834.0%

Top 20 Concentration

0.0%

Turnover Rate

557%

Category	Weight	Description
Technology	25.4%
Financial Services	21.8%
Consumer Cyclical	11.8%
Communication Services	9.5%
Basic Materials	8.4%
Industrials	6.7%
Energy	4.4%
Consumer Defensive	3.8%
Healthcare	3.7%
Utilities	2.7%
Real Estate	1.8%

Cost Efficiency

Expense Ratio

7.00%

Median Bid-Ask Spread

3.000%

Performance History

Year	ETF Return	Benchmark Return	Tracking Diff	Volatility	Max Drawdown
2025	23.00%	0.00%	0.00%	0.00%	0.00%
2024	7.40%	0.00%	0.00%	0.00%	0.00%
2023	4.70%	0.00%	0.00%	0.00%	0.00%
2022	-20.10%	0.00%	0.00%	0.00%	0.00%
2021	-3.40%	0.00%	0.00%	0.00%	0.00%

Annualized Return Since Inception

4.39%

Detailed Peer Comparison

Ticker	Name	Issuer	Exp Ratio	AUM (B)	1Y	3Y	5Y	Yield	StdDev 3Y	Sharpe 3Y	Spread
SCHE ⭐	Schwab Emerging Markets Equity ETF	Schwab	7.00%	US$12.1B	28.4%	15.1%	4.5%	2.87%	N/A	N/A	N/A
VWO	Vanguard FTSE Emerging Markets ETF	Vanguard	7.00%	US$108.5B	25.6%	15.0%	4.7%	3.65%	N/A	0.83	N/A
IEMG	iShares Core MSCI Emerging Markets ETF	iShares	9.00%	US$127.3B	29.1%	14.9%	5.9%	2.94%	N/A	N/A	N/A
EEM	iShares MSCI Emerging Markets ETF	iShares	72.00%	US$25.1B	37.9%	15.6%	3.8%	2.20%	N/A	N/A	N/A
SPEM	SPDR Portfolio Emerging Markets ETF	State Street	7.00%	US$16.5B	28.6%	15.6%	4.8%	2.72%	N/A	N/A	N/A
Category Average			50.00%	—	29.9%	15.3%	4.7%	2.88%	—	N/A	—

Risk Metrics

Beta

0.99

Standard Deviation

1 Year	3 Years	5 Years	10 Years
0.00%	0.00%	0.00%	N/A

Sharpe Ratio

1Y	3Y	5Y	10Y
0.00	0.00	0.00	N/A

Sortino Ratio

3 Years	5 Years
0.00	0.00

Maximum Drawdown

1 Year	3 Years	5 Years	Since Inception
0.00%	0.00%	-39.82%	0.00%

Upside Capture

0.0%

Downside Capture

0.0%

Correlations

Liquidity & Trading

Volume

Avg Daily Shares

1,904,155

Avg Daily Dollar Volume

US$66.1M

Trend

stable

Bid-Ask Spread

Metric	Value
Median (Percent)	3.000%
Median (Dollar)	US$0.01
During Hours	0.000%
At Close	0.000%
Volatility	low

Premium/Discount to NAV

Metric	Value
Current	58.00%
30-Day Average	39.00%
1-Year Average	N/A
Standard Deviation	0.00%
Max Premium (1Y)	N/A
Max Discount (1Y)	N/A

Creation/Redemption Activity

Trend

increasing

Net Flows

Period	Net Flow
1 Month	US$0.0M
1 Quarter	US$0.0M
1 Year	US$0.0M

⚠️ Disclaimer: This ETF research report is for informational and educational purposes only. It does not constitute investment advice, a recommendation, or an offer to buy or sell securities. EC² Invest is not a registered investment advisor. All data is sourced from public sources and may contain errors. Past performance does not guarantee future results. ETF investing involves risk, including possible loss of principal. Always conduct your own research and consult with a qualified financial professional before making investment decisions.