Twice a year, MSCI reviews its indexes, and the MSCI Emerging Markets Index – the underlying index for the iShares MSCI Emerging Markets Index (EEM) exchange traded fund (ETF) – is about to see more changes.
MSCI has announced they are upgrading Israel to developed markets status, upon recent market classification analysis. Five “bubble” countries have been watched closely, but for the time being, only Israel was promoted, reports Matther Hougan for Index Universe. Israel is 4% of the MSCI Emerging Markets Index.
The countries of Kuwait, Qatar and the United Arab Emirates are still waiting to go from frontier market status to emerging market level. MSCI is encouraged by the progress made in opening up these markets, while it said Kuwait still faces too many market accessibility issues to be considered.
South Korea is staying put as an emerging market for now, but will be back up for promotion in 2010. Israel’s promotion will take place during MSCI’s May 2010 semiannual index review.
Reclassifying South Korea would have a major effect on the MSCI Emerging Markets Index, as Korea is the third-largest country in the index by weight (12.4%). South Korea wasn’t classified as a developed market because its currency isn’t fully convertible and its stock market’s real-time data didn’t meet the requirement for the change, MSCI said. The South Korean market was not interested in the upgrade either, reports Tal Barak Harif for Bloomberg.