BEWARE ‘SEISMIC SHIFTS’

INVESTORS should prepare for unprecedented opportunities in emerging markets over the next year as new entrants, including Saudi Arabia and China’s domestic shares, are added to global indices in what UBS Group calls “relatively seismic shifts.” The world’s largest index providers such as London Stock Exchange Group Plc unit FTSE Russell, MSCI Inc, and S&P Dow Jones Indices are due to review a series of indices to take on the so-called SACKs – Saudi Arabia, Argentina, China onshore shares (also called A-shares), and Kuwait, David Rabinowitz, UBS head of Asia-Pacific market structure, wrote in a report. The rejig will likely result in some $121 billion (R1.64 trillion) in active and passive fund flows shifting across the emerging-market universe, according to UBS. Investors will look to “position themselves, align their portfolios and take account of relatively seismic shifts in emerging market index weights,” Rabinowitz said. “With over $500 billion of passive fund flows alone tracking the EM segment across MSCI, FTSE and S&P, we expect liquidity shifts to occur.” | Bloomberg