Two Key Differences Between S&P Emerging BMI and MSCI Emerging Markets Indices

The three largest index providers in the world are S&P DJI, MSCI, and FTSE Russell. For emerging markets, the MSCI Emerging Markets Index is the most popular and widely used benchmark globally. Though MSCI and S&P indices are similar there are significant differences between the indices offered by these companies. It is important to understand these differences especially for investors that go with derived products such as an Emerging Markets ETF for example.

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Source: A Primer on Country Classification in the Context of Saudi Arabia’s Upgrade to Emerging Market StatusMichael Orzano , S&P Indexology

The first key difference is that S&P has classified South Korea as a developed country since 2001. But MSCI continues to consider it as an emerging market. So South Korea is part of the MSCI Emerging Markets Index and accounts for 15% of the weightage. This potentially crowds out other less-developed market from the index.

The second difference is that MSCI initiated a partial inclusion of China A-shares in its benchmarks as of June 1, 2018. However S&P DJI and FTSE Russell have not included these shares in their indices yet. These firms are currently reviewing Chinese shares for potential inclusion in their respective emerging market indices.

In addition to China’s A-Shares, Argentina and Kuwait are also under review by S&P for reclassification from frontier to emerging markets.

Related ETFs:

  • Vanguard MSCI Emerging Markets ETF (VWO)
  • iShares MSCI Emerging Markets ETF (EEM)
  • PowerShares MENA Frontier Countries ETF (PMNA)

Disclosure: No Positions


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