A broad-based emerging markets exchange-traded fund (ETF) will typically tilt exposure to China–an obvious case given its status as the second largest economy globally. However, there are specific corners of emerging markets that are also providing opportunities that investors might not be aware of, which Krane Funds Advisors, LLC understands with announcement of its new KraneShares MSCI Emerging Markets ex China Index ETF (NYSE: KEMX).
Excluding is a departure from the norm for KraneShares, which has a strong footprint in the ETF space for its China-focused ETFs and innovative China investment strategies. Newly listed on the New York Stock Exchange today, KEMX is benchmarked to the MSCI Emerging Markets ex China Index, which tracks large cap and mid cap companies within emerging market countries, excluding China.
KEMX is the thirteenth U.S.-listed fund and third emerging market ETF by KraneShares. Rooted in the KraneShares thesis “China is an asset class,” investors will be able to pair KEMX with other KraneShares China-focused core and thematic funds to make a strategic investment without duplicating exposure to China.
“Within emerging markets, KraneShares believes China is in a league of its own; an asset class unto itself distinguished by its market size and unparalleled growth,” said Jonathan Krane, Chief Executive Officer of KraneShares. “We believe that incorporating a strategic China investment strategy that distinguishes China from the rest of EM may help to optimize EM performance as a whole. KEMX is a great tool to enable a completion strategy around China.”
Related: KraneShares Adds Emerging Markets Healthcare ETF
Allowing KEMX to work in conjunction with the firm’s China-focused funds will allow investors to employ the following strategies:
- China Core: Exposure to the full range of publicly listed Chinese companies across the Mainland, US, and Hong Kong Stock Exchanges
- China Core-Thematic: Broad China exposure enhanced by specific sector or investment themes
- China Thematic: Focused exposure to specific sectors or themes in China
- China Tactical: Ability to dynamically adjust China’s weighting within an Emerging Market portfolio
For EM investors who have stuck with the space for the last five years, 2019 can almost be seen as a year of retribution thus far. Core exposure to emerging markets has provided investors with strong gains thus far this year.
While the majority of investors might have been driven away by the red prices in emerging markets during much of 2018, savvy investors who were quick to see the opportunity viewed EM as a substantial markdown. From a fundamental standpoint, low price-to-earnings ratios in emerging markets ETFs have made them prime value plays as capital inflows continue.
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