By Mark DeCambre
Russia’s invasion of Ukraine is entering its third week and many of the equity indexes covering investments in Moscow are closed indefinitely. The Wall Street Journal reported that MSCI Inc. /zigman2/quotes/202905332/composite MSCI +0.52% and other index providers removed Russian stocks from their global benchmarks this week, following sanctions imposed by the U.S. and other nations in response to the Kremlin’s offensive in Eastern Europe.
Exchange-traded fund behemoths, the iShares Core MSCI Emerging Markets ETF /zigman2/quotes/201783445/composite IEMG -0.30% and iShares MSCI Emerging Markets ETF /zigman2/quotes/201454250/composite EEM -0.40% removed all Russian stocks from their funds effective on Wednesday.
But is there another even bigger concern, lurking out there for emerging market investors, as the geopolitical situation in Ukraine unfolds? Some experts are pointing to China as a potential problem and we spoke to Perth Tolle, founder of the Freedom 100 Emerging Markets ETF, to talk strategy.
|Aberdeen Standard Physical Palladium /zigman2/quotes/202108695/composite PALL||18.2|
|VanEck Oil Services ETF /zigman2/quotes/207596637/composite OIH||15.2|
|U.S. Oil Fund LP /zigman2/quotes/203483736/composite USO||13.3|
|First Trust Global Tactical Commodity Strategy Fund /zigman2/quotes/207775995/composite FTGC||11.9|
|iShares GSCI Commodity Strategy Fund /zigman2/quotes/208581139/composite COMT||11.9|
…and the bad
|ARK Fintech Innovation ETF /zigman2/quotes/205650811/composite ARKF||-17.0|
|KraneShares CSI China Internet ETF /zigman2/quotes/205873167/composite KWEB||-14.7|
|U.S. Global Jets ETF /zigman2/quotes/207744796/composite JETS||-14.6|
|ARK Next Generation Internet ETF /zigman2/quotes/201846852/composite ARKW||-14.2|
|ARK Innovation ETF /zigman2/quotes/204808965/composite ARKK||-13.2|
|SPDR S&P 500 ETF Trust /zigman2/quotes/209901640/composite SPY|
|Invesco QQQ Trust /zigman2/quotes/208575548/composite QQQ|
|SPDR Gold Shares /zigman2/quotes/200593176/composite GLD|
|iShares 7-10 Year Treasury Bond ETF /zigman2/quotes/202862654/composite IEF|
|Vanguard Total Stock Market ETF /zigman2/quotes/202677318/composite VTI|
|iShares iBoxx $ Investment Grade Corporate Bond ETF /zigman2/quotes/206919681/composite LQD|
|Financial Select Sector SPDR Fund /zigman2/quotes/209660484/composite XLF|
|iShares U.S. Real Estate ETF /zigman2/quotes/202389641/composite IYR|
|Invesco KBW Bank ETF /zigman2/quotes/202716924/composite KBWB|
|iShares iBoxx $ High Yield Corporate Bond ETF /zigman2/quotes/204471305/composite HYG|
Earlier this week, MarketWatch’s sister publication, Investor’s Business Daily, wrote that investors rocked by developments in Russia, with an almost daily stream of Western companies suspending activity from the country, shouldn’t forget China. “Nearly 15 major companies in the S&P 500, including information technologyfirm Texas Instruments /zigman2/quotes/202237907/composite TXN -0.90% and Applied Materials /zigman2/quotes/209393259/composite AMAT -3.24% plus Tesla /zigman2/quotes/203558040/composite TSLA -1.79% , report getting a quarter or more of their revenue from China,” wrote IBD.
And China’s ties to Russia may present itself as a possible issue for investors buying China-related assets or who have exposures to funds linked to Beijing. IBD noted that ETF exposure to China is in “orders of magnitude greater thanRussia ever was.”
For example, China accounts for around 33% of the aforementioned iShares MSCI Emerging Markets ETF, which boasts $26 billion in assets, while the iShares Core MSCI Emerging Markets, with $68 billion in assets, holds 31% of its assets linked to mainland China.
What’s the concern with China?