MSCI has taken significant action by removing 60 Chinese securities from its global indexes and adding seven Indian securities, with these changes set to take effect on August 30, 2024. This latest adjustment is part of a broader trend observed this year, where MSCI has been steadily reducing China's presence in its Emerging Markets index. Earlier in February, MSCI removed 66 Chinese companies while adding five Indian stocks. The pattern continued in May with another 56 Chinese stocks being dropped.
In addition to these changes, the MSCI China Index has seen the removal of 69 Chinese securities, with only two new additions: Huaneng Lancang, a hydro power company, and Victory Giant, an electric product manufacturer. This ongoing reduction reflects the growing economic challenges faced by China, including deflation, regulatory pressures on tech companies, and issues in the property sector.
On the other hand, India is emerging as a key player in global markets, with investor sentiment increasingly favoring its rapid economic growth, political stability, and favorable geopolitical alignment, particularly with the U.S. Following these index rebalances, India's weighting in the MSCI Emerging Markets index is expected to grow from 17.9% to 18.5%, while China's will drop to 25.4%.
This shift has already impacted the performance of related ETFs. The iShares MSCI India ETF (INDA), which tracks the top 85% of Indian firms, is up over 17% year-to-date, underscoring strong investor confidence. In contrast, the KraneShares CSI China Internet ETF (KWEB) has dipped by about 2% year-to-date, and the iShares MSCI China ETF (MCHI) has seen a modest increase of around 5% in 2024.
Moreover, investment firms are responding to this shift. For instance, DWS has switched the index of its $56 million emerging markets ETF to exclude China, catering to the growing demand for regionally differentiated investments.
This strategic realignment in global indices and investor behavior reflects the broader economic dynamics at play, with India gaining prominence as a major emerging market amid China's ongoing struggles.
In addition to these changes, the MSCI China Index has seen the removal of 69 Chinese securities, with only two new additions: Huaneng Lancang, a hydro power company, and Victory Giant, an electric product manufacturer. This ongoing reduction reflects the growing economic challenges faced by China, including deflation, regulatory pressures on tech companies, and issues in the property sector.
On the other hand, India is emerging as a key player in global markets, with investor sentiment increasingly favoring its rapid economic growth, political stability, and favorable geopolitical alignment, particularly with the U.S. Following these index rebalances, India's weighting in the MSCI Emerging Markets index is expected to grow from 17.9% to 18.5%, while China's will drop to 25.4%.
This shift has already impacted the performance of related ETFs. The iShares MSCI India ETF (INDA), which tracks the top 85% of Indian firms, is up over 17% year-to-date, underscoring strong investor confidence. In contrast, the KraneShares CSI China Internet ETF (KWEB) has dipped by about 2% year-to-date, and the iShares MSCI China ETF (MCHI) has seen a modest increase of around 5% in 2024.
Moreover, investment firms are responding to this shift. For instance, DWS has switched the index of its $56 million emerging markets ETF to exclude China, catering to the growing demand for regionally differentiated investments.
This strategic realignment in global indices and investor behavior reflects the broader economic dynamics at play, with India gaining prominence as a major emerging market amid China's ongoing struggles.