“China is currently 23% of the MSCI Emerging Markets Index, upon full inclusion it could grow to be as much as 60%. Full inclusion could mean hundreds of billions of dollars of inflows into the newly included segments,” according to a recent research piece by KraneShares, issuer of KBA.
KraneShares arrives at the 60% by assuming MSCI will eventually promote South Korea and Taiwan to developed market status. After seven years of having both countries on its list for such a promotion, MSCI last year removed South Korea and Taiwan as candidates for developed market status.
“The fifteen largest U.S-listed Chinese companies will be added to MSCI’s definition of China in two stages with stage one commencing in November of this year and stage two starting in May 2016,” notes KraneShares. “Our calculations estimate $10 billion in ETF and index fund assets will flow into the stocks. here is an additional $66 billion of active mutual funds and institutional assets that would need to flow into the stocks to remain benchmark neutral. The aggregate market cap of these stocks is $600 billion, making this change so large that MSCI decided to stagger the inclusion over two rebalances.”
KraneShares Bosera MSCI China A ETF
