For exchange traded funds (ETFs) that contain securities based in multiple countries that are at different stages in their economic growth, it can be difficult to accurately label the ETF. The result is an oversimplification where some index providers label a country as "emerging," so then all its ETFs fall under that category as well. A case-in-point is Samsung. Samsung is one of the 70 largest companies in the world and one of the 10 largest companies in the global technology sector. However, because Samsung is based in South Korea, it’s considered an "emerging market" stock by most index providers, says Kelly Haughton of Financial Times.
To solve this problem, Haughton recommends basing index inclusion on the individual companies, not the countries, which Matt Hougan of Index Universe touches on too. This would keep the indexes more accurate and efficient, Haughton argues. Striving for better accuracy is always a noble goal. It will be interesting to see if any global index creators heed the advice.
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