Changes in the world could soon be leading to changes in a major emerging markets index and its exchange traded fund (ETF).
MSCI Barra is thinking of switching up its country lineup in its emerging markets Index, reports Sam Mamudi for The Wall Street Journal. Some fund managers think the changes could create more volatility, and more importantly, affect performance.
- iShares MSCI Emerging Markets Index (EEM): up 8.2% year-to-date; China is 15.4%, Brazil is 13.2%, South Korea is 12.7%, Taiwan is 11.1%, South Africa is 9.5%, India is 6.7%, Russian Federation is 5.4%, Mexico is 5.4%, Israel is 3.7%, Chile is 2.7%, Hong Kong is 2.5%, Czech Republic is 2.0%, Thailand is 1.7%, Indonesia is 1.5%, Philippines is 1.4%, Hungary is 1.3%, Turkey is 1.1%, Peru is 0.6%, Egypt is 0.6%, Malaysia is 0.4%, Colombia is 0.4%, United States is 0.3%, Argentina is 0.1%
In June, South Korea and Israel could be upgraded to the status of “developed markets.” These two countries would then be included into the MSCI EAFE Index, which includes Europe, Australasia and the Far East.
- iShares MSCI South Korea Index (EWY): up 13.2% year-to-date
- iShares MSCI Israel Cap Invest Mkt Index (EIS): up 14.7% year-to-date
- iShares MSCI EAFE Index (EFA): down 11.5% year-to-date
In the short term, it is thought that the South Korea’s withdrawal would negatively affect the performance of the Emerging Market Index and make the emerging markets more volatile because of the absence of its stable market.
It has been announced that Kuwait, Qatar and the United Arab Emirates could be inducted into the Emerging Market Index.
Max Chen contributed to this article.
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