Within the MSCI Emerging Market Index both South Korea and Taiwan have a 10% weighting8. We believe one or both countries could be upgraded by MSCI within the coming years though neither country is currently under review by MSCI for upgrade.
| Today | Inclusion of the onshore markets | Inclusion of U.S-listed Chinese Companies | South Korea Upgrade | Taiwan Upgrade | New China % of MSCI Emerging Markets |
| 23% | +18% | +3% | +12% | +10% | 66% |
MSCI Data as of March 31, 2015. Calculated by KraneShares
Investors will soon have a greater China allocation within their portfolios based on the definitive index changes coming this year and the forthcoming potential changes we outlined above. We believe the vast majority of investors will remain idle as these mandatory changes take place in their portfolios. Proactive investors can potentially benefit from a first mover advantage by taking an early position in the affected segments of China’s markets before their peers are rebalanced into them.
For investors looking for exposure to both segments of China’s markets we outlined above, the KraneShares FTSE Emerging Markets Plus ETF (ticker : KEMP) may be a potential solution. KEMP provides access to both U.S-listed Chinese companies and the onshore Chinese markets within a broad emerging market strategy.
For investors looking for exposure to U.S-listed Chinese companies that will be included into broad MSCI indices starting in November 2015 the KraneShares CSI China Internet ETF (ticker : KWEB) may be a potential solution.
For investors looking for exposure to the onshore markets, the KraneShares Bosera China A ETF (ticker : KBA) tracks an MSCI index based on the concept of the integrated MSCI China equity universe with mainland Chinese securities included.
- The MSCI All Country World Index captures large and mid cap representation across 23 Developed Markets (DM) and 23 Emerging Markets (EM) countries. With 2,466 constituents, the index covers approximately 85% of the global investable equity opportunity set. – Country weightings from MSCI as of 4/30/2015
- GDP data from the World Bank as of 2013
- MSCI benchmarked assets from MSCI as of 3/31/2015
- The MSCI Emerging Markets Index captures large and mid cap representation across 23 Emerging Markets (EM) countries*. With 835 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country – Benchmarked assets from MSCI as of 3/31/2015. Country weightings from MSCI as of 4/30/2015
- Data from World Exchanges as of 1/31/2015. Based on equity exchanges with reported data.
- Potential inclusion data calculated based off amount of assets benchmarked to affected indices by China weighting as of 3/31/2015
- Data from Bloomberg as of 4/30/2015
- Country weightings from MSCI as of 4/30/2015