Assignment

Of

International Finance Management

Submitted To:
Mr. K.B. Manandhar (Instructor)
International Finance Management
Ace Institute of Management

Submitted By:
Denim Jung Shah
6th Trimester ‘A’
MBA Evening

Kathmandu, Nepal
Q.N. 26) What is Emerging Markets MSCI?
Answer: The MSCI Emerging Markets Index stands for Morgan Stanley Capital International (MSCI) used to
measure equity market performance in global emerging markets. It is just one index created by MSCI, which
has been constructing and maintaining them.

An emerging market is a country that has some characteristics of a developed market, but does not meet
standards to be a developed market. This includes countries that may become developed markets in the future or
were in the past. The term "frontier market" is used for developing countries with slower economies than
"emerging". The economies of China and India are considered to be the largest emerging markets. Emerging
markets are considered relatively risky because they carry additional political, economic and currency risks.
They certainly are not for those who value safety and security above all else. An investor in emerging markets
should be willing to accept volatile returns; there is a chance for large profit at the risk of large losses. An
upside to emerging markets is their performance is generally less correlated with developed markets. As such,
they can play a role in diversifying a portfolio, and thus reduce overall risk.

 Why investors watch it?

Answer: MSCI Emerging Markets Indexes offer a building block approach with a rules-based, consistent and
transparent methodology. Using MSCI Emerging Markets as a framework to build portfolios helps to avoid
unintended bets and risks. Robust foundation allows investors to measure exposure to all sources of equity
returns using a single global framework. For a global portfolio, emerging markets (EM) play several important
roles. Some investors may invest in EM to diversify their global allocations, while others may be looking for
faster growth. Investors should carefully consider the investment objectives, risks, charges and expenses of the
Funds before investing. Foreign investing involves currency, political and economic risk. Funds focusing on a
single country, sector and/or funds that emphasize investments in smaller companies may experience greater
price volatility. Investments in emerging markets, real estate, currency, fixed income and alternative
investments include additional risks.

Due to the investment strategy of certain funds they may make higher capital gain distributions than other ETF
so, investor watch it. MSCI selects stocks for its equity indexes that are easily traded and have high liquidity.
The stocks must have active investor participation and be without owner restrictions. MSCI must balance
accuracy and efficiency. It must include enough stocks to represent the underlying equity market. Investors
often add emerging markets exposure to their portfolios because these smaller economies are growing more
rapidly than the economies in the developed world. Yet, research has shown that one out of five individual
investors think they should have 10% or less of their stock portfolios in international equities. Investing in
world stock markets is, essential to a balanced portfolio. There is a method to invest directly in the index itself.

 Which countries are included in this index?

The MSCI Emerging Markets Index captures large and mid-cap representation across 24 Emerging Markets
(EM) countries with 846 constituents the index covers approximately 85% of the free float-adjusted market
capitalization in each country. The emerging market index tracks the performance of stock markets in the
following 24 developing countries: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary,
India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, South Africa,
Taiwan, Thailand, Turkey, and United Arab Emirates.