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Emerging Markets Index (MSCI)



Definition

The Emerging Markets Index (MSCI) is a benchmark index created by Morgan Stanley Capital International (MSCI) that measures the performance of stocks in emerging economies. Countries included in this index are classified as developing or emerging due to their progress in social, economic, and governance factors. The MSCI Emerging Markets Index offers investors a comprehensive view of the economic health and performance of these markets.

Phonetic

The phonetics for “Emerging Markets Index (MSCI)” are:Emerging: /ɪˈmɜːr.dʒɪŋ/Markets: /ˈmɑːrkɪts/ Index: /ˈɪndɛks/ MSCI: /ɛm ɛs si aɪ/Please note that phonetics can vary slightly based on different accents and dialects.

Key Takeaways

  1. MSCI Emerging Markets Index is developed by Morgan Stanley Capital International (MSCI) and it provides a measure of stock performance in 27 emerging market countries.
  2. The Index is comprised of over 1,400 companies, representing a wide range of sectors, making it a diverse and broad representation of the full breadth of developing economies worldwide.
  3. While the MSCI Emerging Markets Index offers a benchmark for investment performance in the emerging markets, it also comes with relatively high risk due to economic and political instability, currency volatility, and less transparency in these markets.

Importance

The Emerging Markets Index by MSCI is an essential financial tool because it provides a measure of equity market performance in global emerging markets. It is significant for investors, analysts, and economists because it offers insights into the health, trends, and opportunities in the performance of about 26 emerging economies including countries like China, Brazil, India, and Russia. By tracking this index, investors can make informed investment decisions regarding emerging market investments. It also allows for efficient global asset allocation and benchmarking of fund performances, reflecting the value of individual companies, industries, and entire economies. Thus, MSCI’s Emerging Market Index is a crucial gauge in understanding and navigating the evolving global economic landscape.

Explanation

The MSCI Emerging Markets Index, developed by Morgan Stanley Capital International (MSCI), is specifically designed to act as a benchmark to measure the performance of financial markets in the emerging economies. It is prominently used by fund managers to assess the investment prosperity and diverse opportunities available in rapidly growing economies, such as India, China, Brazil, Russia and South Africa. By featuring around 27 countries’ financial markets, the MSCI Emerging Markets Index provides investors with a comprehensive and in-depth understanding of these markets’ performance. The index plays a crucial role in guiding investment decisions. Its importance is underscored by the fact that many mutual funds, exchange traded funds (ETFs), and index funds are modeled after it. Fund managers typically use it to compare their funds’ performances and to construct diversified portfolios to mitigate risks associated with investing in volatile markets. Additionally, the MSCI Emerging Markets Index serves as a tool for economic analysis, enabling economists to track the economic performance of these emerging economies and predict their future growth trajectory. Therefore, it becomes an essential resource for global investors, analysts, and economists who are interested in investing or researching these emerging economies.

Examples

1. MSCI BRIC Index – This is a MSCI index that is designed to measure the equity market performance in the global emerging markets of Brazil, Russia, India, and China. 2. MSCI Emerging Markets Asia Index – This measures the performance of large and mid cap segments across 9 Emerging Markets countries in Asia – China, India, Indonesia, South Korea, Malaysia, Pakistan, Philippines, Taiwan and Thailand. 3. MSCI Frontier Markets Index – This focuses on 33 frontier markets including smaller, less developed countries such as Serbia, Nigeria, Vietnam and countries across the Middle East and Africa. This index is designed to represent the performance of opportunities for financial growth in these up-and-coming markets.

Frequently Asked Questions(FAQ)

What is the Emerging Markets Index (MSCI)?
The Emerging Markets Index by MSCI is an index created by Morgan Stanley Capital International (MSCI) that represents the performance of large and mid-cap stocks from various emerging markets.
What are the largest emerging markets included in this index?
The largest emerging markets included in the index are countries like China, India, Brazil, South Africa, and Russia.
How is the MSCI Emerging Markets Index calculated?
The index is calculated using a float-adjusted, market capitalization weighted methodology. The index is designed to measure equity market performance in the global emerging markets.
How can I invest in the MSCI Emerging Markets Index?
While you can’t directly invest in the index, there are various ETFs and mutual funds that aim to mimic the performance of the MSCI Emerging Markets Index. You can invest in these funds through your brokerage account.
Why should investors consider emerging markets?
Emerging markets often offer greater potential for high returns due to their rapid economic growth. However, they also come with higher risk due to possible political instability, currency volatility and less mature market infrastructure.
How often is the MSCI Emerging Markets Index updated?
The MSCI Emerging Markets Index is recalculated on a quarterly basis, typically in February, May, August, and November.
Where can I find the current value of the MSCI Emerging Markets Index?
The current value of the MSCI Emerging Markets Index can be found on financial news websites, MSCI’s official website, and on trading platforms that provide stock market indices information.
What is the difference between developed markets and emerging markets?
Developed markets refer to countries that have a high level of economic development and stability, with well-established infrastructures and regulatory bodies. Emerging markets, on the other hand, are characterized by developing economies that may have high growth potential but also pose higher risks.

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