Connect with us

Hi, what are you looking for?

Finance

How global index providers fix country classifications

As large sums of global money flows now follow global indice..

As large sums of global money flows now follow global indices, it is important to understand how global index providers decide on country classifications and country weightages.

A global equity index typically has two components, a developed market index and an emerging market index. Until the ’90s, emerging market investments were not necessarily mandatory for all large institutional investors, but that changed more than a decade ago and global investment portfolios are the norm now.

What has also changed is that markets were earlier classified on the basis of their GDP per capita, size of the stock market and accessibility criteria, since most of these parameters were in sync with each other.

However, given the growing size of global fund flows and growth of emerging markets, a number of criteria are now reviewed. This can include the presence of a strong regulatory authority, ease of repatriation of funds, custody, clearing and settlement infrastructure, transparency in decision making, liquidity and transaction costs.

While index providers provide the criteria for classification, the actual decision making will devolve on large market consultations. In an annual or biannual exercise, market participants, including asset managers, traders and asset owners are polled for their views on each of the criteria for the market.

Based on the feedback received, markets are classified as developed, emerging and frontier. The weight of the market within the index is derived from the float-adjusted market capitalisation.

This means the sum of each of the stocks included in the market by their float market capitalisation gives each market its weight in the index. Countries that have restrictions on foreign investors in the form of a percent limit will get that limit applied to the market capitalisation to give a clear picture of what is actually available to foreign investors.

In recent time, this issue has been muddied considerably by the multiplicity of restrictions and access provided by markets like China, where it is hard to pin down a single number.

Earlier, we spoke of frontier markets, a category where markets are typically very small or accessible in a very limited way. Markets like Ghana, Tunisia, Bangladesh and Sri Lanka fall in this category.

Graduating markets from frontier to emerging and emerging to developed can cause a big change in fund flows. While a move from frontier to emerging is welcomed across board, the story can be different for a move from emerging to developed status.

Israel had an approximate 3 per cent weightage in an emerging market index a few years ago. When it was graduated in 2010, it fell to only 0.4 per cent of a developed market index. This kind of a move can actually cause fund flows to considerably dry up.

Original Article

[contf]
[contfnew]

ET Markets

[contfnewc]
[contfnewc]

47 Comments

47 Comments

  1. bonjur

    December 13, 2021 at 3:27 am

    I get pleasure from, result in I discovered just what I wastaking a look for. You’ve ended my four day long hunt!God Bless you man. Have a nice day. Bye

  2. how to suck nipples

    December 13, 2021 at 8:59 pm

    Thanks for the blog post.Much thanks again. Really Great.

  3. Dildo

    December 14, 2021 at 7:09 am

    Thanks again for the blog post. Awesome.

  4. penis extender

    December 14, 2021 at 11:20 am

    I am so grateful for your blog article.Thanks Again. Want more.

  5. big shot squirting vibrating dildo

    December 14, 2021 at 12:59 pm

    Really enjoyed this article.Really thank you! Will read on…

  6. testing out sex toys

    December 14, 2021 at 2:41 pm

    I cannot thank you enough for the article.Really thank you! Really Cool.

  7. male stroker

    December 14, 2021 at 4:39 pm

    Very neat blog article.Thanks Again. Awesome.

  8. best remote panties

    December 14, 2021 at 6:27 pm

    I really liked your blog post.Thanks Again. Awesome.

  9. penis girth sheath

    December 14, 2021 at 9:12 pm

    Thanks so much for the blog post. Really Cool.

  10. https://123play.bet/

    December 14, 2021 at 11:29 pm

    Thanks for the post.Thanks Again. Keep writing.

  11. The Ghanaian Standard

    December 15, 2021 at 11:32 am

    Muchos Gracias for your blog post.Thanks Again. Great.

  12. bitcoin revolution review

    December 15, 2021 at 1:14 pm

    Im thankful for the blog article.Thanks Again. Cool.

  13. Christopher Mcfarlane

    December 15, 2021 at 2:13 pm

    Very nice style and fantastic content material, hardly anything else we require : D.

  14. how to use a paint sprayer on the roof

    December 16, 2021 at 9:23 am

    wow, awesome article post.Really thank you! Will read on…

  15. Buy Rotorazer Saw

    December 16, 2021 at 4:22 pm

    This is one awesome blog article.Much thanks again. Much obliged.

  16. sell feet pics 2021

    December 16, 2021 at 9:58 pm

    Great article.Really thank you! Keep writing.

  17. investment management

    December 17, 2021 at 4:05 pm

    Very good article.Really thank you! Fantastic.

  18. mp3juice download lagu

    December 17, 2021 at 5:52 pm

    Very good blog. Awesome.

  19. Sony KDL32W600D 720p Smart LED TV Review USA

    December 17, 2021 at 9:02 pm

    Really enjoyed this blog.Really looking forward to read more.

  20. Candles

    December 18, 2021 at 11:32 am

    Im thankful for the article post.Really looking forward to read more.

  21. 오피스타

    December 19, 2021 at 2:39 pm

    I cannot thank you enough for the blog article.Really looking forward to read more. Really Cool.

  22. decentralized social blockchain

    December 20, 2021 at 9:13 am

    Fantastic blog.Really looking forward to read more.

  23. beneficios de nopal

    December 21, 2021 at 3:10 pm

    Im grateful for the blog post.Much thanks again. Fantastic.

  24. medical grade liquid silicone

    December 21, 2021 at 6:58 pm

    Really appreciate you sharing this article post.Really thank you! Fantastic.

  25. Labkesehatan.blogspot.com

    December 22, 2021 at 5:39 pm

    Thanks for the article post.Thanks Again. Want more.

  26. agen situs slot online

    December 22, 2021 at 7:48 pm

    Really appreciate you sharing this blog.Really looking forward to read more. Really Great.

  27. Bathtub caddy tray

    December 23, 2021 at 8:10 am

    Great blog article.Much thanks again. Will read on…

  28. Dating Blog

    December 23, 2021 at 10:40 am

    Really informative post.Much thanks again. Great.

  29. power cbd gummies review

    December 24, 2021 at 8:33 am

    Im obliged for the blog. Really Cool.

  30. does sleep guard plus work

    December 24, 2021 at 12:28 pm

    Really enjoyed this article post. Cool.

  31. download menjadi dia tiara andini

    December 26, 2021 at 8:18 am

    Great blog article.Thanks Again. Fantastic.

  32. buy cvv credit card

    December 27, 2021 at 10:06 am

    FRESHCC.RU – TRUSTED STORE CCV-DUMPS-BANKS-PAYPAL-ACCOUNTS

  33. 마타운

    December 27, 2021 at 12:48 pm

    I value the blog article.Thanks Again. Much obliged.

  34. cryptocurrency

    December 27, 2021 at 2:59 pm

    Muchos Gracias for your blog.Thanks Again. Really Cool.

  35. see the website

    December 27, 2021 at 9:20 pm

    Hello, all is going nicely here and ofcourse every one is sharing data, that’sgenuinely fine, keep up writing.

  36. mp3 juice video download free

    December 28, 2021 at 8:09 pm

    A big thank you for your article.Really thank you! Great.

  37. gaji karyawan bank bca

    December 28, 2021 at 11:33 pm

    Thanks a lot for the blog post. Fantastic.

  38. cochroach dreams

    December 29, 2021 at 11:30 am

    This is one awesome post. Cool.

  39. 출장마사지

    December 29, 2021 at 1:52 pm

    Fantastic blog article.Thanks Again. Want more.

  40. 건마

    December 29, 2021 at 4:47 pm

    Say, you got a nice blog article.Thanks Again. Fantastic.

  41. telugu movie reviews

    December 30, 2021 at 1:12 pm

    Can someone recommend Shift Dresses? Thanks xox

  42. how to invest in crypto currency

    December 31, 2021 at 1:13 am

    I do agree with all the ideas you’ve presented in your post. They’re really convincing and will certainly work. Still, the posts are very short for novices. Could you please extend them a little from next time? Thanks for the post.

  43. www.megafamous.com/

    January 11, 2022 at 8:42 pm

    Appreciate it for helping out, great information.

  44. Hello my family member! I wish to say that this article is amazing, nice written and come with approximately all vital infos.I would like to see extra posts like this.Feel free to visit my blog … Amy

  45. Superslot PGSLOT

    January 16, 2022 at 8:23 pm

    Thanks a lot for the article.Thanks Again. Will read on…

  46. 마사지

    January 17, 2022 at 6:45 pm

    Really appreciate you sharing this article.Really thank you! Keep writing.

Leave a Reply

Your email address will not be published.