Executive Summary
The S&P Emerging Ex-China BMI (Broad Market Index) offers a unique measurement of emerging markets by excluding Chinese equities, which tend to dominate many market-capitalization-weighted indices. Since its inception in 1989, the S&P Global BMI Series has provided benchmarks for performance measurement, asset allocation and index replication. This paper explores the unique characteristics of the S&P Emerging Ex-China BMI and its distinct risk/return profile.
The S&P Emerging BMI, a member of the S&P Global BMI Series, provides a reliable benchmark for emerging market equities. The predominance of Chinese equities in emerging markets translates into a sizable weight in most float-adjusted market-cap-weighted indices, so the S&P Emerging Ex-China BMI was launched to meet the need for a benchmark for emerging market equities that excludes China. In this paper, we will learn more about the index’s distinct risk/return profile and delve into how its characteristics provide a unique perspective on emerging market equities.
Index Characteristics
The S&P Emerging Ex-China BMI spans 22 markets and over 3,000 large-, mid- and small-cap constituents. It follows the same methodology as its benchmark, the S&P Emerging BMI, with the added exclusion of companies domiciled in China, which has the largest market weight and constituent count in the benchmark. Additionally, due to the regional market classification framework used by S&P Dow Jones Indices (S&P DJI), our emerging market benchmarks exclude constituents domiciled in South Korea as this market is classified as developed, a status it has held since 2001. This is an important characteristic, as a comparable competitor index—the MSCI Emerging Markets ex China—classifies South Korea as an emerging market. It is worth noting that every year S&P DJI conducts a complete review of all regional markets included in its global equity benchmarks to determine if current classifications are accurate or if a market consultation is appropriate to reevaluate their status. Quantitative and qualitative criteria are employed alongside global investor feedback when evaluating market status, and final decisions are made by the S&P Dow Jones Indices Committee based on criteria and conditions, feedback from clients ahead of formal consultations and, finally, the results of the consultations.
