Vanguard Group's switch to tracking the FTSE Group's benchmarks for six of its international index funds could benefit Brazil, Russia, India, and South Africa, but would be negative for the Chinese markets, JP Morgan estimated.
Vanguard's cost-cutting move is part of a wider switch of 22 index funds away from tracking MSCI Inc benchmarks, and would lead to changes in the composition of the U.S. fund manager's global index funds to account for differences between the two providers.
The biggest change would involve South Korea, given that FTSE classifies the country as a developed market, while MSCI continues to designate it as an emerging market.
"As South Korea has about 15.5 percent weight in the MSCI EM index, the turnover for the EM fund during the benchmark transition will be significant," the investment bank said.
Brazil, South Africa and India would see the biggest inflows, for a combined total of almost $5.1 billion, while Russia would attract $432 million, J.P.Morgan estimated.
However, China could see $371 million in outflows given the lower allocation for the country in FTSE's emerging market indexes, while South Korea would be the biggest emerging market loser, with an estimated $9 billion in outflows.
Taiwan, Malaysia, Indonesia and Thailand were the other Asian markets expected to see inflows after a switch expected to be phased-in over a number of months starting in January 2013.
Brazil's Petrobras and AmBev along with India's ITC Ltd and Russia's Novatek and NK Lukoil are expected to be the biggest stock gainers after the move, J.P.Morgan said.
South Korea's Samsung Electronics, Hyundai Motor Co, Posco, Kia Motors and Shinhan Financial are likely to be the biggest losers.
Copyright Thomson Reuters 2012
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