Retail investors are increasingly investing in Chinese and Brazilian ETFs instead of traditional U.S. markets, driven by declining U.S. equities and attractive valuations. Major growth has been observed in investment volumes in these two countries in 2025, in stark contrast to the U.S.’s more subdued returns. Experts suggest this shift indicates a broader trend of diversification among investors looking to tap into emerging markets.
Retail investors expanding their horizons through exchange-traded funds (ETFs) are now increasingly turning their attention to emerging markets like China and Brazil. This shift seems to be driven by the steep decline in U.S. equities following initiating tariffs, known as a trade war, in recent years. Data indicates that many Indians, using the Reserve Bank of India’s liberalized remittance scheme (LRS), are looking past the U.S. and investing more in these two countries this year.
Several brokers, who provide access to international markets, reported a noticeable trend regarding this year’s fundraising. For instance, platforms that facilitate investments show that funds poured into Brazil and China-focused ETFs surged relative to U.S. investments, which were prior favorites for local investors. Sitashwa Srivastava, founder and CEO of Borderless, noted a significant change in investor focus, particularly from January through March, with heightened interest in China-oriented ETFs.
From a financial standpoint, Vested Finance’s figures reveal that investments in Brazilian ETFs skyrocketed to $3 million in just 2025, representing an astonishing 80-fold increase from 2024 figures. Meanwhile, Chinese ETFs experienced a 10-fold increase to $10 million, while U.S. ETF investments saw a much more modest lift. In hard numbers, the U.S. ETFs amassed about $80 million this year.
According to data from Appreciate Wealth, certain trends are solidifying. China-related investments grew by 36% in trade volume and 61% in value compared to the previous year. Brazilian investments, by contrast, jumped by 110% in volume and an impressive 245% in investment value for the same period. When we look at U.S. investments, however, the growth rates were much less dynamic, hovering at around 11% in volume and 18% in value.
So, why the sudden shift? Investors are finding better valuations in the markets of China and Brazil. Recent market corrections in the Dow Jones did not help its attractiveness; the index fell over 6% since the start of the year, while the Shanghai Composite Index and Brazil’s IBovespa actually recorded gains.
In January, the Ibovespa index showed trailing valuations of approximately 10.8 times earnings compared to 16.2 times for the Shanghai Composite. The Dow, on the other hand, stood at an eye-watering 23.21 times, making Chinese and Brazilian markets much more appealing for investors. Coupled with a dramatic increase in outbound remittances for equities and other debt securities via the LRS, which jumped by 65%, this dynamic paints a picture of a budding investor interest in these emerging markets.
Mayuresh Kini, a co-founder of Zinc Money, emphasized a rising interest among investors, especially in sectors such as technology and renewable energy ETFs from China. Meanwhile, Viram Shah, CEO of Vested Finance, pointed out how both institutional and retail investors are seeking new opportunities in less crowded markets, turning to China and Brazil, expected to rebound soon.
Expert opinions note Brazil’s allure stems from reasonable valuations and a recovering economy that’s better shielded from global tariffs. Ankita Pathak from Ionic Asset highlighted how increasing growth forecasts and anticipated rate cuts enhance Brazil’s investment appeal ahead. However, while broad interest in the U.S. still dominates, there remains a caution around the current economic backdrop.
Even amidst ongoing U.S. tariffs on China, experts believe that there is still a story worth investing in. Pathak remarked on China’s resilience amidst adversity, pointing out that many businesses within China do not rely on U.S. markets and are thriving. While skepticism exists, she also suggests there are greater upsides awaiting those who decide to invest in China.
In summation, the shift of retail investors from U.S. markets to China and Brazil ETFs underscores a growing trend toward diversification amid economic uncertainties. This transition sees a significant uptick in interest and investment volumes in these emerging markets, driven largely by attractive valuations and economic recoveries. As the landscape evolves, both regions appear poised for better returns, leaving investors with a challenging but promising choice of reallocating their portfolios to potentially capitalize on new opportunities.
Original Source: www.livemint.com
