The Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO), the largest ETF tracking developing world equities, could soon see a new addition to its country lineup after index provider FTSE Russell recently promoted Kuwait to emerging markets status.
VWO is one of the least expensive emerging markets ETF with an annual fee of 0.14%, or $14 on a $10,000 investment, making it less expensive than 90% of competing funds, according to Vanguard data. The ETF currently features exposure to more than 20 emerging markets.
Kuwait “won inclusion in FTSE Russell’s list during the weekend, rewarding efforts by local regulators and the stock exchange to modernize trading systems and attract local and foreign investors. Kuwait’s main equity index has rallied 16 percent this year, the best performance among major Gulf markets, boosted by speculation it would gain promotion,” reports Bloomberg.
News of FTSE Russell boosting Kuwait to emerging markets status could benefit another ETF that does not track a FTSE index. The iShares MSCI Frontier 100 ETF (NYSEArca: FM) allocates about 19.7% of its weight to Kuwait, one of the largest weights to the country among all ETFs.
“Kuwait’s graduation to emerging-markets classification by index compiler FTSE Russell could prompt inflows of as much as $700 million from investors, according to the money manager run by the nation’s largest lender,” reports Bloomberg.
Frontier markets include those less advanced capital markets from the developing world with an investable stock market that is less established than those in the emerging markets. Consequently, frontier market stocks are consider much riskier than other global markets and are not for the faint of heart.