An influential financial services firm launched a review this week into the way it classifies a foreign stock market as either emerging or developed, a move that could eventually trigger the reallocation of billions of dollars in global capital.
In a discussion paper released this week, MSCI Inc, a developer of widely followed international market indexes, asked clients to comment on changes that could make it easier for markets such as Israel and South Korea to be reclassified as developed. Both countries, it wrote, "have achieved significant advancements in their structure and openness to international investors."
MSCI, which counts 24 of the 25 largest asset managers in the world as clients, says it will report its conclusions by June. It would then be at least a year before any countries would be upgraded or downgraded, the company said.
More than US$3 trillion in investments are benchmarked against MSCI international indexes, according to the company.
Any changes to its indexes would almost certainly induce additional investments in markets newly classified as developed. Vanguard Group's US$16 billion Pacific Stock index mutual fund, for instance, aims to mirror MSCI's Pacific index, which includes only developed markets. In addition, pension funds and other institutional investors generally limit their exposure to emerging markets to a small percentage of assets.
"It does make a great deal of difference to the construction of portfolios that are approaching Asia Pacific," said Andrew Foster, acting chief investment officer of Matthews Asian Funds, a San Francisco-based mutual fund company.
The paper sought comments from institutional investors on its classification criteria. It asked, for instance, whether it continued to make sense to exclude countries with significant geopolitical risk or currency restrictions from the list of developed markets.
It's not immediately clear whether South Korean stocks would be helped or hurt by a change in the country's classification, said Frank Nielsen, MSCI executive director for indexes in the Americas.
"You would have index funds in the emerging markets space selling and you'd have index funds in the developed markets buying," he said. "So therefore it's impossible to forecast if there will be any particular direction of these movements."
South Korea and Israel comprise 14 percent and 2 percent respectively of the emerging markets index. Among other countries listed as emerging markets are Taiwan, China, Brazil and Russia. Asian developed markets include Japan, Singapore, Hong Kong and Australia.
MSCI Inc is a spin-off of Morgan Stanley, and was formerly called Morgan Stanley Capital International. The company, which went public in November, licenses its stock indexes to asset managers and mutual fund companies.
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
CROSS-STRAIT TENSIONS: The US company could switch orders from TSMC to alternative suppliers, but that would lower chip quality, CEO Jensen Huang said Nvidia Corp CEO Jensen Huang (黃仁勳), whose products have become the hottest commodity in the technology world, on Wednesday said that the scramble for a limited amount of supply has frustrated some customers and raised tensions. “The demand on it is so great, and everyone wants to be first and everyone wants to be most,” he told the audience at a Goldman Sachs Group Inc technology conference in San Francisco. “We probably have more emotional customers today. Deservedly so. It’s tense. We’re trying to do the best we can.” Huang’s company is experiencing strong demand for its latest generation of chips, called
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure