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Portfolio > ETFs > Broad Market

A Shifting Frontier

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Changes are ahead for ETFs linked to frontier and emerging markets.

During MSCI’s semi-annual index review, Qatar and the United Arab Emirates were upgraded away from frontier to emerging markets. At the end of April, both countries represented over 33% of country exposure in the iShares MSCI Frontier Markets ETF (FM). But with both countries now gone, stocks from Kuwait and Nigeria will increase weighting inside FM’s country allocation. The changes take effect in early June.

South Korea and Taiwan are also in line for a possible promotion out of the MSCI Emerging Markets Index to developed market status. Since both countries account for almost 30% of exposure to the MSCI benchmark, it would mean more exposure to Chinese stocks. This would impact the iShares MSCI Emerging Markets ETF (EEM), which has around $36 billion in assets.

Index providers have different criteria for classifying countries. MSCI uses just three factors, including a country’s economic development, its accessibility to investors, along with the size and liquidity of its market as determining factors. Others, like FTSE, focus on different gauges such as a country’s regulatory environment and creditworthiness.


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