Author Topic: Global trackers, exclude China etc, so how are they global?  (Read 1140 times)

mubington

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Global trackers, exclude China etc, so how are they global?
« on: January 01, 2018, 05:46:48 PM »
I've just finished my first ever book on geopolitics, and now have a heightened sense of how little I know about the likely global economy distribution over the long term.

So I look at the country distribution of VWRL for instance and it omits stuff like China and India.

How on earth is this a 'world' tracker? Seems very odd. I invest in these funds to diverse a bit from US and the UK, but these funds seem to only track western economies. Just seems misleading and a bit weird, given China's huge growth this year and recently.

Any thoughts?

maizeman

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Re: Global trackers, exclude China etc, so how are they global?
« Reply #1 on: January 01, 2018, 06:13:49 PM »
Chinese based companies are about 2.8% of VWRL. I couldn't find data for India, but the index VWRL tracks is currently 1.16% indian equities.

The global equity market is about $70 trillion as of 2015, and the Shanghai and Shenzhen stock exchanges combined for about $8 trillion (11.4%). The two major stock exchanges in India (BSE & National) combined account for about $3 trillion (4.3%). So it appears that while VWRL does have some exposure to these countries, is does indeed appear to be underweight for both countries. Not sure why.

mubington

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Re: Global trackers, exclude China etc, so how are they global?
« Reply #2 on: January 01, 2018, 06:30:59 PM »
Ah I think I might have been confusing GDP with equity markets.

I was thinking of China having the 2nd largest economy in the world, so I was surprised it wasn't in the top 10 equity markets listed in VWRL, and didn't check down further.

daverobev

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Re: Global trackers, exclude China etc, so how are they global?
« Reply #3 on: January 01, 2018, 07:46:15 PM »
A lot of China, at least, was closed to outsiders for investing.

As to market size to GDP, well, again, it's a closed economy. Lots of government controlled stuff. Communism and all that.

India is quite protectionist as well. Also remember that a lot of commerce in developing countries is done with multinationals - so all those large companies from the USA, UK etc are part emerging, in that they will grow their developing divisions as the developing economy grows.

bwall

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Re: Global trackers, exclude China etc, so how are they global?
« Reply #4 on: January 02, 2018, 01:12:10 AM »
Large Chinese companies aren't always listed in China, either. Alibaba and Tencent are two behemoths that come to mind. I believe they're listed in New York and Hong Kong, respectively. So, they are part of the 'world tracker', but not China's stock market.

So, foreigners can partake in the rise of China, but not the average Chinese citizen.


marty998

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Re: Global trackers, exclude China etc, so how are they global?
« Reply #5 on: January 02, 2018, 03:37:37 AM »
Indian companies and the economy in general is still beset by corruption. Many Western companies will preclude themselves from investing precisely because of this.

cerat0n1a

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Re: Global trackers, exclude China etc, so how are they global?
« Reply #6 on: January 02, 2018, 03:51:31 AM »
Indian companies and the economy in general is still beset by corruption. Many Western companies will preclude themselves from investing precisely because of this.

India is considerably less corrupt than many other places, sadly. In fact, it seems that more than half of the countries in the world are ranked as more corrupt than India.

https://www.transparency.org/country/IND

Mubington is correct that VWRL is somewhat underweight in India & China vs their local stock market total cap as a proportion of the world total. VWRL tracks the FTSE All-world index and that Index is based on what international investors can actually trade - which for China means mostly Hong Kong listed stocks and not Chinese 'A' class shares listed in Renmimbi in Shanghai, where foreign ownership is limited by quotas. There's a lot of technical detail on the FTSE site, if interested.