The MSCI EM Evolution: Is China ready for its own allocation?

Growing economic might calls for rethink

The past decade has seen some significant changes to the emerging market investment landscape, both in terms of the shifting geographical bias and the types of investors that make up the shareholder bases of many emerging market companies.

In particular, China's growing size within emerging markets portfolios has started to raise questions for global investors, for example, is it time to establish a dedicated China allocation or continue to incorporate China within their emerging market allocation? The influence of China A-shares In 2019, MSCI increased the inclusion ratio of China A-shares from 5% to 20% in the MSCI Emerging Markets Index. These changes have resulted in China's correlation with the MSCI EM Index going from around 0.65 in 2003 to 0.9 today. Over the next few years, it is likely to increase to 1. Howe...