MSCI Index ETF
When you are trading, you want to catch a trend and open a position before it starts. When you are investing, you seek new and undiscovered investment areas to gain a foothold before everyone else. As the new hot spots of the global investment realm, the emerging markets offer many opportunities to do exactly that. Emerging markets are the developing countries which often portray a low income per capita and a large income distribution gap. They aspire to reach the developed countries’ economic characteristics and may become economic powerhouses in the future. Naturally, the still-undiscovered profit springs in these growing economies gravitate the investors who are looking to expand their financial territories. iShares MSCI Emerging Markets Index ETF provides the traders with the ability to capitalise on the same opportunities by trading the shares of the best emerging markets index.
What is the MSCI Emerging Markets Index?
MSCI Emerging Markets Index (NYSEARCA: EEM) is a benchmark index which measures the aggregated performance of over 1200 equities in 26 emerging markets like Brazil, Russia, India, and China (known together as BRIC). Morgan Stanley Capital International (MSCI) created the Emerging Markets Index (EEM) in 1988 to monitor the progress of large and mid-cap size companies initially in 10 developing countries. Over time, the EEM index grew to cover 26 countries, including BRIC, Korea, Mexico, and Turkey. The constituents of the index represent 13% of the global market capitalisation and belong to a large variety of sectors such as Financials, Information Technology, Consumer Discretionary, and Communications. The MSCI group also has three other emerging markets indices to measure large, mid, and small cap segments individually and one more index to measure them altogether. In April 2013, EEM was introduced to public trading as an exchange-traded fund (ETF). The shares of the MSCI Emerging Markets Index ETF started trading in the NYSE Arca stock exchange at $11.12 per share. The index consistently gained value over the next four years and reached its all-time high at $55.83 per share in October 2007. Global recession hit EEM hard as only one year later, the ETF dropped as low as $18.22. A few months later, EEM started recovering and climbed over the next three years to touch briefly above $50. Since then, the index is trading in a range between $30 and $50.
MSCI Emerging Markets Index Composition
iShares MSCI Emerging Markets Index ETF is a float-adjusted market capitalisation index which gauges the stock performance of more than 1200 companies in 26 different developing countries. Since EEM is an aggregated index, it focuses on measuring the performance of ‘emerging markets’ as a single basket. Thus, it doesn’t account individually for a single equity or country represented in the index. MSCI board gathers four times a year (February, May, August, and November) to revise the overall performance of the index and its constituents. Index rebalancing occurs only in May and November to reflect the market cap ranking changes in the respective equity markets.
Countries in the MSCI Emerging Markets Index ETF
Sectors in the MSCI Emerging Markets Index ETF
|Cash and/or Derivatives||1.50%|
Top 10 Companies in the MSCI Emerging Markets Index ETF
|Alibaba Group||China||Consumer Discretionary||6.81%|
|Taiwan Semiconductor||Taiwan||Information Technology||4.62%|
|China Construction Bank||China||Financials||1.62%|
|Naspers||South Africa||Consumer Discretionary||1.28%|
|Ping An Insurance||China||Financials||1.14%|
|BlackRock Cash Funds||United States||Cash and/or Derivatives||0.93%|
|Industrial and Commercial Bank of China||China||Financials||0.91%|
How to trade MSCI Emerging Markets Index ETF
Emerging Markets ETFs are among the hottest financial instruments when it comes to portfolio diversification. They have relatively higher volatility compared to other market-cap ETFs and larger liquidity than most of their constituents. However, their diverse holdings gives them a certain degree of price stability and resilience against market events as when there is a market-moving event, emerging markets investors often steer their investments from one developing country to another, which are both likely to be listed in the same ETF. MSCI Emerging Markets Index is one of the best emerging market funds as it encompasses a wide range of growing economies and sectors. The comprehensive nature of EEM ETF gives it a certain edge over other emerging markets benchmarks. Furthermore, EEM ETF stock CFDs allow traders to capitalise on the price changes without having to purchase the stocks physically through NYSE Arca after meeting a long list of conditions to trade in the stock exchange.
iShares MSCI Emerging Markets Index ETF Trading Information
- Benchmark Index: MSCI Emerging Markets Index
- Exchange: NYSE Arca
- Ticker: EEM
- Trading Hours: Monday to Friday, 14:30 – 20:59 (GMT).
- MT4 & MT5 Symbol: #EEM
- Valuation: U.S. Dollars ($)
- Leverage: AvaTrade offers up to 20:1 leverage in EEM ETF CFD trading.
- Trade Size: 10 shares
- Spread: 0.13%
- Increment: 0.01
Fundamental Analysis of MSCI Emerging Markets Index ETF
Unless there is a global crisis like wars, natural disasters or pandemics that affect the entire world and global financial markets, fundamental analysis of emerging markets funds is based on three basic factors: countries, sectors and companies. These dimensions are going hierarchically from most influential to the least influential.
- Country-wide fundamental factors
EEM is focused on the performance of developing countries; therefore, a nation-wide market event in a constituent country can have a strong impact on the index price. The effect can be especially significant if the country has a high index weight, like China which has over 30% weight on the index price. The most influential country-wide fundamental factors are the national central bank’s monetary policy and interest rate decisions; economic indicators and data; political events like elections, trade wars and tax regulations. It’s also very important to notice that most of the constituent countries are in Asia. This means that the price of EEM stocks has significant vulnerability to Asian economic indicators and regional events like geopolitical tensions, climate issues and natural disasters.
- Sector-wide fundamental factors
Business activities in developing countries are usually congregating on a few powerful industries. For example, China relies heavily on manufacturing and mining, while Korea’s main industries are electronics and communications. This restricted focus depends on the national economy, largely on limited variables, and makes it vulnerable against the developments in these sectors. Any sectoral development like new trade agreements or tax regulations can strongly affect the business activities and stock prices, which, in turn, would reflect on the national economy. Thus, the sectors represented in the EEM ETF can have moderate to high impact on the index value. Taking a closer look, two-thirds of the MSCI EEM index is skewed towards four sectors, three of which are related with technology (IT, Consumer Discretionary, and Communication Services) and the most-weighted sector (Financials) has significant interests in them. The index price may be quickly derailed or lifted by any negative or positive tech-related development in Asia.
- Company-specific fundamental factors
Emerging market stocks are often high-risk & high-return assets which perform well when the economy is flourishing, but stampede investors when things go sour. Large national income gaps limit the domestic revenue of emerging market companies and force them to rely on international trade, which has its own hitches and difficulties such as political relations, trade agreements, and volatile exchange rates. MSCI emerging market ETF lists over 1200 equities, rendering an individual equity’s influence on the index price quite low. However, earnings reports of the top 10 companies in the EEM index, which are mostly competing in the international arena, can represent the activity of their respective national sectors and can affect the index price.
Technical Analysis of MSCI Emerging Markets Index ETF
CFD trading MSCI Emerging Markets Index ETF requires thorough understanding of trading characteristics when analysing its technical price charts. The EEM is a highly liquid but highly volatile asset which often experiences gaps between daily opening and closing prices when markets are shaking. Therefore, three main technical indicator types may prove to be useful:
- Support & Resistance:
Psychological price levels which the EEM price failed to break beyond in the past. Using previous price levels and larger time frames, S&R can help estimate determining the opening prices for the next day.
- Average True Range (ATR):
ATR is a volatility indicator which is often used to analyse price gaps. It gives information about the degree of volatility in the asset price by comparing the present day’s volatility to the average price volatility in the past 14 days.
- Moving Averages (MAs):
A Moving Average is a continuous calculation of an average price in a specific number of past price points. It appears as a continuous line in the middle of the prices. When the index price crosses below the MA line, a downtrend may initiate; if it crosses from below to above, an uptrend may be coming.
Why trade MSCI Emerging Markets Index ETF with AvaTrade?
Trading MSCI Emerging Markets Index ETF with traditional methods in NYSE Arca requires going through a long stock exchange registration process, a satisfaction of minimum investment requirements. On the other hand, as online traders, we enjoy the comfort and ease of trading the best opportunities in the financial markets from our fingertips.
AvaTrade equips traders with the finest trading tools and state-of-the-art trading platforms to trade EEM with the best ETF trading conditions.
- Fully Regulated:
AvaTrade is a globally regulated online CFDs & forex broker, always ensuring the security and safety of traders.
- Two-Way CFD Trading:
We don’t have to physically purchase and attach ourselves to a financial instrument – CFD trading allows us to buy and sell financial assets without ownership.
- Best Trading Conditions:
Up to Leverage and only 0.13% Spread in MSCI EEM ETF allows us to trade with financial ease.
- Trading at Your Fingertips:
Access fully equipped MetaTrader 4 and MetaTrader 5 trading platforms for desktop and browser, and AvaTradeGO mobile trading application.
- Personalised Risk Management:
AvaTrade’s proprietary risk management tool AvaProtect enables you to hedge your positions immediately and reduce your risk significantly.
- Award-Winning Support:
Trader support team of AvaTrade provides multilingual assistance via phone, live chat, and e-mail.
Let’s emerge victoriously!
The key to success in trading is timing. Warren Buffett knows it. Peter Lynch knows it. When an opportunity rarely utilised emerges in front of you as if served to your hands, your responsibility is to consider it. The financial success of early investors in the emerging markets is the best example of this. Now, it’s time for us to emerge. Let’s put our emerging markets knowledge into use and start trading with confidence.
MSCI Emerging Markets Index Fund FAQ
Why should I trade the MSCI Emerging Markets Index Fund?
If you are looking for an easy way to trade the movements of emerging market economies, which can be notoriously volatile in isolation, then the MSCI Emerging Markets Index Fund is a good choice. This ETF tracks movements in the markets of 26 different developing countries, looking to pivot to those that are making the strongest moves higher at any given time. Keeping track of all of these markets on your own would be an impossible task, but by using this fund you can capture some of the strongest growth across the globe.
Is the MSCI Emerging Markets Index Fund the best fund for trading emerging markets?
There are many emerging market funds, but none that are as comprehensive as the MSCI Emerging Markets Index Fund. In that respect we would have to say that it is the best fund for trading on emerging markets, particularly for those who don’t have the time or inclination to study the individual markets of developing nations. By trading CFDs on the MSCI Emerging Markets Index Fund it is possible to profit from the global growth seen in the world’s emerging economies. Plus, the CFDs offered at AvaTrade avoid the expensive commissions charged on ETFs.
What’s the best strategy for trading the MSCI Emerging Markets Index Fund?
Of course it is always possible to trade the MSCI Emerging Markets Index Fund on a technical basis, looking for the index price to bounce off support and resistance levels, and to follow trend lines. This can be a successful method for trading most financial markets. In the case of the MSCI Emerging Markets Index Fund it can also be profitable to watch the fundamentals that can influence the emerging market economies. In general, this is the strength or weakness of the largest trading partners for these countries. That means economic data from the U.S. and Europe can often give trades clues to the direction of emerging market economies.