Last week, MSCI released its Pro-forma for the quarterly index review (QIR), with some surprising additions and the continued growth of China within emerging markets, writes Brendan Ahern, CIO for KraneShares, in a recent blog post on China Last Night.
The updates mean that ETF managers and passive fund managers will be rebalancing their funds and portfolios at the end of the month as Southeast Asian representation grows. Of the new additions to the global standard index are Grab, the leading rideshare app in Southeast Asia that also offers a host of other services; Aercap, the global leader in aircraft leasing based out of Ireland; and Lufax Holding, a major fintech company out of China.
In addition, Sea Ltd, a major e-commerce and gaming company that is focused within Southeast Asia, completes its three-stage inclusion into both the MSCI developed market index as well as the MSCI Singapore index.
China’s weighting in the MSCI Emerging Markets Index grows from 32.1% to 32.2%, an increase reflected in the bulk of emerging market stocks being added; of the 16 emerging market stocks that are being included for the first time on indexes, 14 are from China.
“China’s free-float market capitalization is now $2.558 trillion, which is nearly 2X Taiwan ($1.3 trillion), 2.5X bigger than South Korea ($981 billion) and India ($1.011 trillion), 2X MSCI Emerging Markets Europe, Middle East, and Africa ($1.125 trillion), and 5X bigger than MSCI Emerging Markets Latin America ($547 billion),” writes Ahern.
Investing in China’s Growth With KALL
The KraneShares MSCI All China Index ETF (KALL) tracks the MSCI China All Shares Index, a benchmark of companies that are based in and headquartered in China, as well as listed in Mainland China, Hong Kong, and the U.S.
KALL is broadly diversified across the Chinese economy and includes a 23.59% allocation into consumer discretionary, 22.44% allocation to financials, 13.18% allocation to communication services, 9.58% to consumer staples, and other sector allocations such as healthcare, information technology, industrials, and more.
Top holdings of KALL include tech giant and hardware maker Tencent (9.14%); e-commerce and internet giant Alibaba Group at 6.74%; and major shopping platform Meituan at 2.67%.
KALL carries an expense ratio of 0.49% with fee waivers that expire August 1, 2022.
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