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Emerging Markets ETFs Are Top Picks for Investors This Year

Jung-Pang Wu | Flickr | Getty Images

A resurgent China has helped make emerging market exchange-traded funds (ETFs) the top-sellers so far this year, according to data from IndexUniverse.

Investors poured nearly $6.8 billion into the emerging market ETFs since the start of 2013, versus $8.7 billion in U.S. equity ETFs. Meanwhile, $5 billion went into the two largest emerging market ETFs, iShares MSCI Emerging Markets and Vanguard FTSE Emerging Markets. (Read More: China's Rebound Powered by 'Risky' Sectors)

Some $3.43 billion went to iShares MSCI Emerging Markets and $1.38 billion flowed into Vanguard FTSE Emerging Markets.

"In the risk-on market we've seen over the past six months, emerging markets have been dominant," says Matt Hougan, the global head of editorial for IndexUniverse. "EEM is up more than 18 percent over the past six months, while the S&P 500 is up just 10 percent. That is pulling investors in."

After underperforming for the past several years, China is back, adds Hougan.

"Broad-based China is up 25 percent over the past six months, outperforming both the U.S. and Emerging Markets as a whole. With new leadership and a new five-year plan in place, China is back on track for growth," Hougan told CNBC. "And when China is working, investors know that emerging markets as a whole are working."

Among the top three holdings for EEM, which has $52 billion in assets under management, are Samsung Electronics (4.12 perecent), Taiwan Semiconductor Manufacturing (2.01 percent), and China Mobile (1.85 percent)

And among top three holdings for VWO, which has $60 billion in AUM, are: Samsung Electronics (2.51 percent), China Mobile (1.86 percent), and Mexican telecommunication company America Movil, S.A.B. de C.V (1.39 percent)

Last year, the emerging market ETFs slightly outperformed the S&P 500, but their year-to-date performance this year has been lagging the broader market. EEM is up just 0.25 percent since Jan. 1, and VWO is up 0.6 percent, while the S&P is up more than five percent. (Read More: Dim Sum Bonds Off to a Strong Start This Year)

In a separate report, Institute of International Finance, the global association of more than 470 financial institutions, forecast a continued rise in investment flow to emerging markets, given low interest rates in developed markets and strong growth in emerging economies.

—By CNBC's Karina Frayter.

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