Invesco’s $1.7 Billion Emerging Markets Fund Rides China Tech and Banks To Huge Gains

The Invesco RAFI Emerging Markets ETF (NYSEARCA:PXH) has delivered exceptional returns, surging 42% over the past year to reach $28.10 as of January 27, 2026. This performance significantly outpaced the S&P 500’s 16% gain and slightly edged out the iShares MSCI Emerging Markets ETF (NYSEARCA:EEM | EEM Price Prediction) with its 46% return. The rally reflects renewed appetite for emerging markets exposure as investors position for a potential shift away from US equities after years of domestic market dominance. The fund’s $1.7 billion asset base and fundamentally weighted methodology provide diversified exposure to developing economies while maintaining a value tilt, complemented by a 2.15% dividend yield.

China Exposure: The Portfolio’s Defining Bet

PXH’s performance lives and dies by China, where the fund maintains heavy exposure across financials and technology. State-owned banks collectively represent over 6% of holdings, creating direct exposure to Beijing’s credit policies and economic management. The technology allocation centers on Tencent (OTCMKTS:TCEHY) at 3.00% of the portfolio, positioning investors to benefit from China’s digital economy recovery.

The critical macro factor to watch is China’s economic stabilization trajectory. Recent stimulus measures from Beijing have sparked optimism, but sustainability remains uncertain. Monthly National Bureau of Statistics releases for industrial production and retail sales will signal whether the rebound has legs. Any reversal in policy support or renewed regulatory crackdowns would hit the fund’s largest holdings directly, including China Construction Bank (OTCMKTS:CIHHF) at 2.82%, Baidu (NASDAQ:BIDU) at 0.84%, JD.com (NASDAQ:JD) at 1.22%, and PDD Holdings (NASDAQ:PDD) at 0.43%.

Earnings Divergence Among Holdings

The micro factor that matters most is the widening performance gap among PXH’s underlying companies. JD.com reports Q4 2025 earnings on March 9 after posting 57% earnings compression despite revenue growth, signaling brutal margin pressure in Chinese e-commerce. Meanwhile, PDD demonstrates superior operational leverage with earnings outpacing revenue expansion. This divergence shows how competitive dynamics are reshaping the Chinese internet sector.

Baidu reports February 26 after posting an $11.2 billion loss, though its stock has rallied on AI optimism that fundamentals may not justify. These diverging results create concentration risk that investors must monitor closely. Check Invesco’s monthly fact sheets and quarterly holdings updates to track rebalancing, as the fund’s active management adjusts allocations based on fundamental changes.