Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
M* Adding China A-Shares To The Index: What It Means For Fundholders
It means EM index and many actively-managed EM funds will be forced to increase their China allocations. Before it was Hong Kong only. Big difference. Will most certainly mean higher prices for China A-share stocks. Same is likely to happen with Chinese currency being added to major currency markets. A bubble in the making? Who knows, but this is certainly what the Chinese government has been wanting for a long time. At some point, EM indexes will shed Korea, which could be problematic except the country will move from EM to EAFE, so shares will be bought on a different platform. Difference here is that Korea will be a smaller part of EAFE than it was of EM.
A good outline of China's place in the index world. How to Tell Emerging from Developed Markets Posted on June 11, 2015 by David Ott ,Acropolis Financial After my article the other day about China being the second largest stock market in the world when you factor in all of their alphabet soup of stocks (click here for a refresher), a number of people asked me how China could still be considered an emerging market given their massive size. It turns out that the generally accepted criteria for inclusion in either the developed or emerging market categories (and frontier, which is the real Wild West) is based on per-capita Gross Domestic Product (GDP), which measures the total economic output of a country on a per-person basis. http://acrinv.com/how-to-tell-emerging-from-developed-markets/
There are many good reasons for MSCI's delay (although the change is coming). There are still purchasing restrictions in place for ownership of stocks represented in various Chinese stock indexes. Transparency/reporting practices, quotas, accessibility. Etc. These are all resolvable, but until they are ..... I don't know why Vanguard is going ahead with this. Doesn't seem prudent.
Comments
How to Tell Emerging from Developed Markets
Posted on June 11, 2015 by David Ott ,Acropolis Financial
After my article the other day about China being the second largest stock market in the world when you factor in all of their alphabet soup of stocks (click here for a refresher), a number of people asked me how China could still be considered an emerging market given their massive size.
It turns out that the generally accepted criteria for inclusion in either the developed or emerging market categories (and frontier, which is the real Wild West) is based on per-capita Gross Domestic Product (GDP), which measures the total economic output of a country on a per-person basis.
http://acrinv.com/how-to-tell-emerging-from-developed-markets/
So much for "passive index investing."
http://www.bloomberg.com/news/articles/2015-06-09/china-mainland-shares-on-track-to-be-added-to-msci-stock-indexes