The world of finance is always changing and evolving; in the world of ETFs a large number of international options marketed toward North American investors are available to choose from, however, the vast majority have specifically avoided securities from Mainland China for a number of reasons.
This past week, MSCI announced that it would be adding securities from mainland China to its MSCI Emerging Market Index, marking a milestone in the ETF community and setting a benchmark which may or may not be followed by other funds in the weeks and months to come.
Shares of the MSCI Emerging Market Index traded immediately higher on the news, as investors began piling into this particular ETF on the announcement of specific sought-after Chinese firms being added to the fund.
Shares of Chinese firms have typically been under-represented when compared to other major emerging markets, largely due to corporate governance issues as well as perceived issues with stock manipulation and increased volatility.
The MSCI Emerging Market Index has been looking at allowing specific Chinese firms into the ETF for some time, however has just recently decided that now would be the right time to do so. Over the coming weeks and months, investors will be watching this ETF closely, as will other funds interested in following suit.
Having a well-diversified portfolio of stocks (both across sectors and geography) is important for every investor. Remember to consult an investment advisor before making any investment decisions.
