Emerging markets ETF investors saw their shares bounce back Tuesday after two straight sessions of heavy selling sparked by turbulent world events. But despite the respite, investors are still looking at significant declines over the past month.

The

iShares MSCI Emerging Markets

ETF

(EEM) - Get Report

rose $4.25, or 3%, to $147.21 after falling 6% to $142.96 over the last two trading sessions. The benchmark emerging markets ETF is off about 20% since reaching its high for the year of $182.40 on April 12.

The negative market reaction to the election victory of a leftist-tinged coalition in India last week plus the assassination of a key Iraqi political leader on Monday triggered harsh selling across global exchanges.

But Sonia Gandhi's announcement earlier Tuesday that she would "humbly decline" to be the next prime minister of India -- a decision that followed Hindu nationalist outrage over the prospect of a foreign-born woman at the helm of the nation -- caused the Indian market to snap back. (The Italian-born Congress Party member is the widow of Rajiv Gandhi, who was prime minister and is a son of legendary leader Indira Gandhi.)

Indian shares make up 5.11% of the MSCI Emerging Markets Index. There are no ETF's that directly track the benchmark Sensex index of the Bombay Stock Exchange.

The market also seems to have shaken off the Monday assassination of Izzedine Salim, the president of the U.S.-appointed Iraqi Governing Council, even with the June 30 U.S. handover in Iraq looming.

"The uncertainty hangs there all the time, but its degree changes," says Paul Mendehlson, strategist at Windham Financial. "The assassination was literally yesterday's news, and now the market is looking towards what's next."

With emerging markets growing in importance across the global financial landscape, ETF's tracking emerging market indexes have attracted increased attention among traders. When it was first introduced in April 2003, the average daily volume for the iShares MSCI Emerging Market Index was less than 50,000. The average daily volume for the past three months has increased to 235,000. Last week, volume regularly broke 400,000.

The iShares MSCI Emerging Market Index, which tracks a 26-country index, has also benefited from a strong one-year performance among emerging market countries. Even after the recent dramatic decline, the ETF is still up 34% since May 2003.

Morningstar analyst Bill Rocco says investors seem to have noticed this ETF, because it already has nearly $2 billion in assets, making it one of the biggest options in its category. Nevertheless, the usual warning about risk applies.

"First and foremost it's essential to move into this or any other diversified emerging markets offering slowly," says Rocco. "These funds are volatile and people should not be surprised by profit-taking, especially after such an aggressive run-up."