The Evolution of Emerging Markets (Part 2)

While the makeup of the universe of emerging-markets stocks will inevitably continue to evolve, it is impossible to say what it will look like 10 years from now.

Ben Johnson 18.12.2017
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In part 1 of this article, we looked at how the emerging markets have changed over time. In part 2, we are going to look at what the future might hold.

What the Future Might Hold
While the makeup of the universe of emerging-markets stocks will inevitably continue to evolve, it is impossible to say what it will look like 10 years from now. That’s precisely why many investors choose to invest in this market segment using a broad, market-cap-weighted index fund. However, it’s safe to say that country membership and the level of access to previously closed markets will remain in flux.

For example, as part of its 2017 annual market classifi­cation review, MSCI announced that it will include China A-shares in the MSCI Emerging Markets and MSCI ACWI indexes (please see our article “MSCI Takes a Step to Bring China A-Shares Into the Fold”). MSCI’s decision, which follows FTSE Russell’s 2015 launch of China A-share inclusion indexes, is recognition of the significant strides China has made toward opening its capital markets to foreign investors in recent years. Exchange-traded funds and index funds tracking the affected indexes will add some or all of the 222 A-shares earmarked for inclusion to their portfolios and will ultimately respond to any subsequent steps that materialize as part of this longer-term road map toward bringing onshore Chinese stocks into the fold.

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About Author

Ben Johnson  Ben Johnson, CFA is the Director of Passive Fund Research with Morningstar.

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