KraneShares MSCI Emerging Markets ex China Index ETF (KEMX)KEMX

KraneShares MSCI Emerging Markets ex China Index ETF (KEMX)

Profile

Primary Focus: KEMX tracks the MSCI Emerging Markets ex China Index, offering exposure to diverse emerging markets excluding China. This ETF focuses on large and mid-cap companies across various sectors in countries like India, Taiwan, Brazil, and South Korea.

Asset Allocation: Approximately 80% allocated to equities, with the remaining in cash and derivatives. The top sectors include financials, information technology, and consumer discretionary.

Investment Strategy: Primarily utilizes a passive replication approach, mirroring the investable universe of the MSCI Emerging Markets ex China Index.

Objective

The primary objective of KEMX is to provide investment results that, before expenses, generally correspond to the total return performance of the MSCI Emerging Markets ex China Index.

Issuer

KraneShares: Established in 2012, KraneShares is a leading provider of Exchange Traded Funds (ETFs) focused on China and other emerging markets. They have a strong reputation for expertise in these regions and managing thematic ETFs.

Reputation and Reliability: KraneShares boasts a solid reputation for transparency and commitment to investor education. They have received various industry awards and recognitions for their innovative ETF offerings.

Management: The ETF is overseen by experienced portfolio managers with a deep understanding of emerging markets. The team leverages data-driven methodologies and rigorous risk management procedures.

Market Share & Total Net Assets

Market Share: KEMX holds a market share of approximately 4.5% within the Emerging Markets Non-China Equity ETF category.

Total Net Assets: As of February 16, 2023, KEMX has total net assets of over $686 million.

Moat

Competitive Advantages:

• Diversification: Offers broad exposure to emerging markets outside of China, mitigating country-specific risks.
• Passive Management: Maintains lower expense ratios compared to actively managed emerging market ETFs.
• Specialized Focus: Strong expertise in thematic investing and emerging markets provides a strategic edge.

Financial Performance

Historical Performance:

• Since Inception (10/23/2014): 162.86% total return.
• 1-Year: 0.96% return.
• 3-Year: 9.90% annualized return.
• 5-Year: 10.09% annualized return.

Benchmark Comparison: KEMX generally outperformed the MSCI Emerging Markets ex China Index (MXEF) in recent years, demonstrating its effectiveness in tracking the benchmark.

Growth Trajectory

The ETF exhibits a moderate growth trajectory, mirroring the overall performance of emerging markets excluding China. Future growth depends on factors like global economic recovery, sector-specific development, and geopolitical situations.

Liquidity

Average Trading Volume: Approximately 93,000 shares per day, indicating relatively high liquidity.

Bid-Ask Spread: Average spread of roughly 0.04%, offering low trading costs.

Market Dynamics

Factors Affecting Market:

• Global economic growth and trade dynamics.
• Political stability and policy reforms in emerging economies.
• Commodity price fluctuations impacting major sectors in emerging markets.

Competitors

Key competitors include iShares MSCI Emerging Markets ETF (EEM) and Vanguard FTSE Emerging Markets ETF (VWO), with market share percentages of 47% and 31%, respectively.

Expense Ratio

KEMX has an expense ratio of 0.39%, considered low compared to other emerging market ETFs.

Investment Approach & Strategy

Strategy: KEMX passively replicates the MSCI Emerging Markets ex China Index.

Composition: The ETF primarily holds stocks of companies within the index, focusing on sectors like financials, information technology, and consumer discretionary.

Key Points

• Diversified exposure to emerging markets outside of China.
• Passive management approach minimizing costs.
• Strong track record and performance exceeding the benchmark index.
• High liquidity and low trading costs.

Risks

• Emerging Market Volatility: Underlying assets might experience higher volatility due to geopolitical and economic factors.
• Currency Risk: Fluctuations in exchange rates can impact returns.
• Market Downturn: The ETF could experience losses during broader market declines.

Who Should Consider Investing

• Investors seeking diversified exposure to emerging markets excluding China.
• Investors with a long-term investment horizon and tolerance for higher volatility.
• Investors looking for passive exposure to emerging market equities.

AI-Based Fundamental Rating

Fundamental Rating Based on AI: 8.5/10

KEMX presents a compelling investment proposition with its diversified exposure, strong performance, low expense ratio, and high liquidity. However, investors should be mindful of the inherent volatility associated with emerging markets.

Resources and Disclaimers

• KraneShares Website: https://www.kraneshares.com/kemx
• MarketWatch: https://www.marketwatch.com/investing/etf/kemx?countrycode=xx
• Yahoo Finance: https://finance.yahoo.com/quote/KEMX/
• ETF.com: https://www.etf.com/etf-profile/equity/kemx

Disclaimer: This information is for educational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor before making any investment decisions.