JP Morgan India Bond Index Inclusion: Three Ems Likely To Face Weight Reductions

Malik notes that Thailand, Poland, and the Czech Republic will see the largest weight reductions due to the gradual reweighting over 10 months, mitigating significant disruption

Thailand, Poland, and the Czech Republic are likely to see reductions in their respective weights in the J.P. Morgan Emerging Market Bond Index (GBI-EM) over the next 10 months. This forecast comes from a recent note by HSBC analysts, which highlights the implications of India’s inclusion in the index starting June 28, 2024. As India’s government securities (G-secs) are phased into the index, they will necessitate a rebalancing to accommodate a 10% weight for India, according to Himanshu Malik, senior global emerging markets rates strategist at HSBC.

Malik explains that the reweighting will result in some EM peers experiencing a cut in their weights, but the impact will be gradual and spread over a 10-month period, which should mitigate any significant disruption. Notably, Thailand, Poland, and the Czech Republic are expected to face the largest reductions in their weights by the end of this period.