Traders have had bigger fish to fry over the past few days, but a potentially noteworthy news event is slated for the after-market docket on Tuesday.

That is when index provider MSCI (NYSE: MSCI) unveils its annual market reclassification, an event that could impact a raft of ETFs tracking developing and frontier markets.

On the other hand, this even has the potential to be anti-climatic as it was last year when MSCI again declined to move South Korea and Taiwan to developed market from emerging market status. To its credit, MSCI does not take market reclassifications lightly.

The last time it changed a market's classification was in 2011 when it demoted Trinidad & Tobago to standalone from frontier. The last time an ETF was affected by an MSCI reclassification was May 2010 when Israel promoted to developed from emerging market. It has taken a while, but the iShares MSCI Israel Capped Investable Market Index Fund (NYSE: EIS) is finally close to getting back to where it traded after the upgraded. Several months, later EIS surged only to enter a multi-year tailspin after becoming a developed market ETF.

Here are some of the ETFs that could be in focus if MSCI delivers some surprises on Tuesday.

iShares MSCI Emerging Markets Index Fund (NYSE: EEM)
An obvious choice to be sure, but the second-largest emerging markets ETF by assets allocated over 25 percent of its combined weight to South Korea and Taiwan at the end of the first quarter. Both have been inline for a promotion to developed market status for several years and many investors believe that at the very least South Korea should get the nod.

To this point, MSCI has declined, citing the fact that the South Korean won is not easily convertible for offshore traders. Arguably, it is a pedantic issue given that other emerging markets featured in the MSCI Emerging Markets Index only have partially convertible currencies. The Indian rupee is one example.

If MSCI does decide to promote South Korea, the move will probably be met with some near-term hysteria, but Vanguard has already shown the world that it is easy to move a major emerging markets ETF away from South Korean stocks without causing a panic. That is what the Vanguard FTSE Emerging Markets ETF (NYSE: VWO). Interestingly, the performance difference between EEM and VWO is not significant this year.

Prediction: MSCI leaves both South Korea and Taiwan as emerging markets.

iShares MSCI Frontier 100 ETF (NYSE: FM)
Yes, it has already been said that FM will be in play this week, but with Qatar and the United Arab Emirates combining for almost 28 percent of FM's weight at the end of the first quarter, the advice bears repeating.

FM and other ETFs with even larger allocations to Qatar and UAE, such as WisdomTree Middle East Dividend ETF (NASDAQ: GULF), have been stellar performers this year, trouncing traditional emerging markets funds in the process.

The impact of the MSCI news on FM, GULF and others will be interesting to say the least. As is the case with South Korea's "not yet" promotion to developed market status, some investors believe UAE should have gotten the nod to emerging markets territory long ago. MSCI has rejected Qatar and UAE five years in a row. How long that dance can be kept up is anyone's guess, but the index provider is running out of excuses, particularly with UAE.

Qatar recently took action to lift foreign ownership limits on its major exchanges, but that news broke last week and it may not be enough to appease MSCI this year, though it is a good move for 2014's reclassification.

If UAE is promoted and Qatar is not, how FM rebalances will be noteworthy as well. Educated guess: The ETF's weights to Nigeria, Pakistan, Kazakhstan and Vietnam will increase. Prediction: UAE gets the nod, but Qatar does not.

For more on ETFs, click here.

Related Articles
  1. Chart Advisor

    Now Could Be The Time To Buy IPOs

    There has been lots of hype around the IPO market lately. We'll take a look at whether now is the time to buy.
  2. Economics

    Long-Term Investing Impact of the Paris Attacks

    We share some insights on how the recent terrorist attacks in Paris could impact the economy and markets going forward.
  3. Chart Advisor

    Copper Continues Its Descent

    Copper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
  4. Mutual Funds & ETFs

    Buying Vanguard Mutual Funds Vs. ETFs

    Learn about the differences between Vanguard's mutual fund and ETF products, and discover which may be more appropriate for investors.
  5. Mutual Funds & ETFs

    ETFs Vs. Mutual Funds: Choosing For Your Retirement

    Learn about the difference between using mutual funds versus ETFs for retirement, including which investment strategies and goals are best served by each.
  6. Mutual Funds & ETFs

    How to Reinvest Dividends from ETFs

    Learn about reinvesting ETF dividends, including the benefits and drawbacks of dividend reinvestment plans (DRIPs) and manual reinvestment.
  7. Mutual Funds & ETFs

    Best 3 Vanguard Funds that Track the Top 500 Companies

    Discover the three Vanguard funds tracking the S&P 500 Index, and learn about the characteristics and historical statistics of these funds.
  8. Forex Fundamentals

    How to Buy Chinese Yuan

    Discover the different options that are available to investors who want to obtain exposure to the Chinese yuan, including ETFs and ETNs.
  9. Mutual Funds & ETFs

    ETF Fees: Why BlackRock is the Latest to Cut Them

    Low expense ratios are a big selling point for ETFs, but are they being focused on too much?
  10. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>

You May Also Like

Trading Center