MSCI's May Index Review: Navigating the Crosscurrents of Global Markets
2min read The May 13, 2025, msci Index Review looms as one of the most consequential events for global equity markets this year. With trillions of dollars in assets tied to its indices, the outcome of this review could reshape capital flows, trigger volatility, and redefine the investment landscape for months to come. For investors, understanding the stakes—and the potential winners and losers—is critical.
Why the MSCI Review Matters
MSCI indices are the bedrock of passive investing, benchmarked by $23 trillion in global assets. When a company is added to an MSCI index, passive funds tracking that index are forced to buy its shares, often leading to immediate price surges. Conversely, exclusion can send shares plummeting. In 2023, for instance, companies added to the MSCI China Index saw average gains of 15% in the week following the announcement, while those removed fell by 8%, according to data from Bloomberg.
This year’s review could be particularly transformative. Emerging markets, which account for roughly 11% of the MSCI All-Country World Index, are likely to see significant changes. Analysts speculate that markets such as Vietnam, Indonesia, and Nigeria—where stock exchanges have improved accessibility and liquidity—could gain new inclusions. Meanwhile, geopolitical shifts, such as China’s evolving market liberalization policies, may also influence decisions.
Ask Aime: Which emerging markets might gain from the MSCI review?
Historical Trends and the Data
The data underscores a clear pattern: inclusion in MSCI indices often acts as a catalyst. Over the past five years, companies added to major MSCI indices have outperformed their benchmarks by an average of 8% in the 30 days following the announcement. However, this momentum isn’t guaranteed. Long-term success hinges on the company’s fundamentals and broader market conditions.
What to Watch for in 2025
- Emerging Markets’ Turn: With MSCI emphasizing liquidity and accessibility, countries like Vietnam—where the Ho Chi Minh Stock Exchange has seen a surge in foreign investment—could see multiple additions.
- Tech and ESG Trends: Companies with strong environmental, social, and governance (ESG) profiles may gain favor, as MSCI continues to integrate ESG metrics into its methodology.
- Geopolitical Risks: Tensions in regions such as the Middle East or Eastern Europe could lead to exclusion of companies tied to unstable markets.
Risks and Considerations
While the review creates opportunities, it also poses risks. Investors must avoid the “MSCI effect trap”—buying stocks purely for index inclusion without analyzing underlying value. A 2022 study by Goldman Sachs found that 40% of companies added to MSCI indices underperformed their sector benchmarks within a year, highlighting the importance of due diligence.
Conclusion: Positioning for Impact
The May 13 review is more than an administrative exercise—it’s a litmus test for global markets. Investors should focus on sectors and regions likely to gain inclusion, while remaining mindful of valuation and geopolitical risks.
Historically, the MSCI Emerging Markets Index has outperformed the S&P 500 by an average of 3 percentage points in the 12 months following a major index review, . This year’s review could amplify that trend, particularly if emerging markets secure new inclusions.
For now, the watchword is preparation. The MSCI decision will reshape portfolios and markets alike. Those who anticipate the changes—and pair that foresight with rigorous analysis—will be best positioned to navigate the crosscurrents ahead.
