MSCI Inc., one of the largest providers of indexes for use by issuers of index funds and exchange traded funds, revealed its February 2022 equity indexes review this week, and there’s some interesting news in there.
That includes some moves that are meaningful to ETFs, including the Emerging Markets Internet Ecommerce ETF (EMQQ). In its announcement, MSCI reveals that some EMQQ member firms are making the move to the widely followed MSCI ACWI Index.
“Twenty-one securities will be added to and eleven securities will be deleted from the MSCI ACWI Index. The three largest additions to the MSCI World Index measured by full company market capitalization will be Grab Holdings A (Singapore), Aercap Holdings NV (Netherlands) and Kimco Realty Corp (USA),” according to the index provider.
Grab Holdings, which is headquartered in Indonesia and Singapore, is a ride-hailing company with food delivery and fintech operations. The stock accounts for 1.62% of EMQQ’s weight. It’s also the tenth-largest holding in the Next Frontier Internet & Ecommerce ETF (FMQQ) at a weight of 3.53%.
Additionally, MSCI is wrapping up its addition of Southeast Asia-focused e-commerce/gaming company Sea Ltd. to the MSCI Singapore and MSCI Developed Markets indexes. That stock is the ninth-largest holding in EMQQ, commanding a weight of 3.79% in that fund. It’s FMQQ’s number five component at an allocation of 5.62%.
Lufax (NYSE:LU), a Chinese fintech company, is also among the well-known names moving to the MSCI ACWI Index. That stock accounts for nearly 1% of EMQQ. It’s not a member of the FMQQ portfolio because that ETF doesn’t hold Chinese stocks.
For investors considering EMQQ and FMQQ, news of the aforementioned names being added to the MSCI ACQI Index is relevant because active and passive funds that benchmark to that index will need to buy shares of those stocks, potentially boosting the shares prices in the process.
FMQQ is relevant on another front. The MSCI review indicates that China’s weight in the MSCI Emerging Markets Index is increasing. For investors looking to avoid Chinese stocks while accessing emerging markets growth stories, FMQQ is a sensible consideration.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.