FTSE GEIS rebalancing expected to generate net inflows into Asia-Pacific and emerging markets, with technology hardware and semiconductors benefiting most

Overview

The report analyzes constituent changes, market reclassifications, and potential passive fund flows arising from FTSE Russell's September 2026 semi-annual review of the Global Equity Index Series. Goldman Sachs believes the rebalancing will be broadly positive for Asia-Pacific and emerging markets, but that the flow impact will be highly concentrated in China, South Korea, Taiwan, and the technology hardware and semiconductor sector, while Japan and parts of the financial and automotive sectors face selling pressure.

Core views

FTSE Russell announced the indicative results of the GEIS semi-annual review after the market close on August 21, 2026. The current proposal is not final and may still be revised before September 4, with implementation scheduled after the market close on Friday, September 18. Accordingly, the report estimates potential passive fund-flow effects based on the indicative list and price and holdings data as of August 21, 2026. The review includes two important market-classification changes. Vietnam will be reclassified from Frontier to Secondary Emerging Market status through a four-tranche inclusion process, with an initial inclusion factor of 10% and the overall transition continuing through September 2027. Greece will be upgraded from Advanced Emerging to Developed Market status, with the change implemented in full during this review. These changes will alter the respective markets' classification, weights, and tracking-fund demand across different FTSE benchmarks. The scale of constituent changes is substantial. Within the FTSE Developed and Emerging All World indices, which cover large- and mid-cap stocks, Developed Markets are expected to add 34 constituents and delete 117, while Emerging Markets are expected to add 125 and delete 112. Within the All Cap indices, which cover large-, mid-, and small-cap stocks, Developed Markets are expected to add 143 constituents and delete 117, while Emerging Markets are expected to add 238 and delete 138. Goldman Sachs estimates that the post-adjustment market capitalization of the FTSE Developed All Cap ex-US Index will be approximately US$33.0tn, down 0.1% from its current level, while that of the FTSE Emerging All Cap Index will be approximately US$11.8tn, up 0.9%, with corresponding index-weight adjustments of 0.8% and 1.3%, respectively. At the fund-flow level, Goldman Sachs expects the rebalancing to generate more than US$15bn of two-way buying and selling flows in Asia-Pacific markets and more than US$10bn in emerging markets. After netting purchases against sales, the two regions are expected to receive net passive inflows of US$4.1bn and US$3.8bn, respectively. The estimates include funds tracking broad indices such as Global All World, All Cap, ex-US, Europe, World, Emerging Markets, and Asia-Pacific ex-Japan, as well as local-market funds covering the United States, Japan, China, and Taiwan. In terms of market divergence, China is expected to receive net inflows of approximately US$1.5bn, making it the largest major beneficiary in Asia; South Korea and Taiwan are each expected to receive US$1.2bn, and India approximately US$0.7bn. Japan is expected to experience net outflows of US$1.0bn, facing the greatest selling pressure among the markets listed in the report. These results indicate that the rebalancing does not represent a uniform increase in allocations across Asia-Pacific, but rather a regional redistribution driven by constituent additions, free-float adjustments, and market-classification changes. The detailed estimates for China are consistent with the overall conclusion. FTSE China All Cap is expected to see total passive purchases of approximately US$2.912bn and sales of approximately US$1.437bn, resulting in net inflows of approximately US$1.475bn. By sector, technology hardware and semiconductors are expected to receive net inflows of US$888mn, capital goods US$311mn, chemicals and other materials US$284mn, and software and services US$234mn. Banks, by contrast, are expected to experience net outflows of US$386mn, representing the most significant sector-level drag in China. The report estimates that China's weight in Global All Cap will rise from 2.76% to 2.80%, an increase of 14 basis points. Taiwan is expected to see total passive purchases of US$1.698bn and sales of US$481mn, resulting in net inflows of approximately US$1.216bn. Flows are highly concentrated in technology hardware and semiconductors, which are expected to receive net inflows of US$1.209bn; capital goods are expected to receive net inflows of US$93mn. The market capitalization of the FTSE Taiwan All World Index is expected to rise from US$3.465tn to US$3.521tn, an increase of 2%, while the All Cap Index's market capitalization is expected to rise from US$3.785tn to US$3.813tn, an increase of 1%. The number of All World constituents is expected to increase from 132 to 136, while All Cap constituents are expected to increase from 527 to 536. At the aggregate Asia-Pacific sector level, technology hardware and semiconductors are expected to receive net inflows of US$3.4bn, significantly more than any other sector, while capital goods are expected to receive net inflows of US$0.5bn. Banks and automobiles are each expected to experience net outflows of approximately US$0.2bn to US$0.3bn. This indicates that market-level net inflows are primarily driven by higher technology-related weights, while the financial and automotive sectors may face offsetting flows due to constituent deletions, lower weights, or free-float adjustments. The Hong Kong stock-level screen further indicates that the flow impact may be concentrated in relatively less liquid securities. Stocks with large projected net purchases listed in the report include InSilico Medicine Cayman TopCo (3696 HK, US$76mn), Easy Smart Group (2442 HK, US$59mn), FWD Group (1828 HK, US$33mn), and MMG (1208 HK, US$29mn). Stocks with large projected net sales include AIA Group (1299 HK, US$82mn), Nexteer Automotive (1316 HK, US$13mn), United Energy (467 HK, US$12mn), SJM Holdings (880 HK, US$9mn), and VSTECS Holdings (856 HK, US$7mn). The Hong Kong list screens for securities with flows exceeding US$3mn and representing at least 0.3 times average daily trading volume, in order to identify rebalancing impacts that are large relative to trading liquidity. Historical performance does not show a completely consistent trading pattern. Before announcements, the relative performance of additions versus deletions has varied considerably, which the report attributes to recent momentum rotation. Historically, additions to the Developed All World and All Cap indices have typically modestly outperformed after announcements. Emerging All World additions have generally performed well around the announcement period, but the post-announcement relative performance of Emerging All Cap additions versus deletions has remained volatile. Therefore, directional passive-fund demand does not imply that prices will reflect the impact along a single path, and actual performance may still be affected by market-style and momentum rotations.

Analysis framework

The report first confirms the timing of the FTSE review announcement, revisions, and implementation, and then examines market reclassifications as well as additions, deletions, and free-float adjustments across the various index tiers. Goldman Sachs then combines the assets of ETFs and mutual funds tracking FTSE global and local benchmarks, EPFR and FactSet Ownership holdings data, free-float factors, and prices as of August 21, 2026, to estimate passive buying and selling demand by market, sector, and individual security. Finally, the report screens for stocks with potentially significant impacts by comparing projected flows with average daily trading volume and evaluates the relative performance of additions and deletions before and after announcements in previous reviews.

Methodology notes

• Event Strategies and Behavioral FinanceEvent-driven analysis

  Index review and rebalancing event analysis

  The report analyzes passive trading that may be triggered by constituent changes and relative performance before and after announcements, focusing on three milestones: publication of the indicative list, final revisions, and formal implementation.

• Quantitative/Factor/Portfolio Theory

  Index-tracking fund-flow estimation

  The report combines the assets of ETFs and mutual funds tracking FTSE broad and local benchmarks, fund holdings, constituent-weight changes, and prices to estimate potential passive purchases and sales for each market, sector, and security.

• Quantitative/Factor/Portfolio Theory

  Composite free-float factor estimation

  Stock-level free-float factors are calculated as the average of Bloomberg, FactSet, and Refinitiv estimates and are used to estimate post-adjustment investable weights and corresponding fund demand.

• Event Strategies and Behavioral FinanceFund Flow/Positioning Analysis

  Passive fund-flow screening relative to average daily trading volume

  The report compares estimated fund flows with average daily trading volume to identify securities for which rebalancing flows are large relative to normal liquidity. Global rankings use a threshold of at least 0.5 times ADVT, while several single-market lists use thresholds of more than US$3mn and at least 0.3 times ADVT.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• FTSE China All Cap

  Expected to receive approximately US$1.475bn of net passive inflows, consistent with the report's estimate of approximately US$1.5bn in overall net inflows for the Chinese market.

  Strengths

  Technology hardware and semiconductors, capital goods, chemicals and other materials, and software and services are expected to receive net inflows of US$888mn, US$311mn, US$284mn, and US$234mn, respectively.

  Weaknesses

  Banks are expected to see net outflows of US$386mn.

  Comparison

  China has the largest projected inflow among the major Asian net-inflow markets listed in the report.

  Risks

  Indicative constituents and weights may still be adjusted before September 4, 2026.

• FTSE Taiwan All Cap

  Expected to receive approximately US$1.216bn of net passive inflows.

  Strengths

  Technology hardware and semiconductors are expected to receive net inflows of US$1.209bn, while capital goods are expected to receive net inflows of US$93mn.

  Weaknesses

  Fund flows are highly concentrated in technology hardware and semiconductors, while automobiles and consumer retail and services are each expected to experience net outflows of approximately US$19mn.

  Comparison

  Taiwan and South Korea are each expected to receive approximately US$1.2bn of net inflows, second only to China.

  Risks

  Final index changes may still vary, and the historical performance path of additions relative to deletions has been volatile.

• South Korean equity market

  Expected to receive approximately US$1.2bn of net passive inflows from the FTSE GEIS rebalancing.

  Strengths

  One of the Asian markets expected by the report to receive the largest net inflows.

  Comparison

  Projected net inflows are comparable to Taiwan's but lower than China's.

  Risks

  Indicative changes may still be revised before September 4.

• Indian equity market

  Expected to receive approximately US$0.7bn of net passive inflows from the rebalancing.

  Strengths

  The report includes it among the major Asian net-inflow markets.

  Comparison

  Projected net inflows are lower than those for China, South Korea, and Taiwan.

  Risks

  Indicative changes may still be revised before September 4.

• Japanese equity market

  Expected to experience approximately US$1.0bn of net passive outflows.

  Weaknesses

  Faces the greatest selling pressure among the markets listed in the report.

  Comparison

  The direction of flows is opposite to that for China, South Korea, Taiwan, and India.

  Risks

  Historical price-performance paths may be affected by market rotations and may not necessarily coincide with estimated fund flows.

• InSilico Medicine Cayman TopCo (3696 HK)

  The Hong Kong market detail table projects US$76mn of net passive purchases.

  Strengths

  It has the largest projected net purchase amount among the potential Hong Kong inflow stocks listed in the report.

  Comparison

  Projected net purchases exceed Easy Smart Group's US$59mn and FWD Group's US$33mn.

  Risks

  The indicative list and fund-flow estimates may still change before final implementation.

• AIA Group (1299 HK)

  The Hong Kong market detail table projects US$82mn of net passive sales.

  Weaknesses

  It has the largest projected net sale amount among the potential Hong Kong outflow stocks listed in the report.

  Comparison

  Projected sales exceed Nexteer Automotive's US$13mn and United Energy's US$12mn.

  Risks

  The indicative list and free-float adjustments may still change before implementation.

Key data

• Indicative results announcement timeAfter the market close on August 21, 2026May still be revised before September 4
• Scheduled implementation timeAfter the market close on September 18, 2026Friday
• Vietnam reclassificationUpgrade from Frontier to Secondary Emerging MarketImplemented in four tranches, with an initial inclusion factor of 10%, continuing through September 2027
• Greece reclassificationUpgrade from Advanced Emerging to Developed MarketImplemented in full
• All World constituent changesDeveloped Markets: 34 additions/117 deletions; Emerging Markets: 125 additions/112 deletionsCovers large- and mid-cap stocks
• All Cap constituent changesDeveloped Markets: 143 additions/117 deletions; Emerging Markets: 238 additions/138 deletionsCovers large-, mid-, and small-cap stocks
• Post-adjustment index market capitalizationDeveloped All Cap ex-US: US$33.0tn; Emerging All Cap: US$11.8tnChanges of -0.1% and +0.9%, respectively, with index-weight adjustments of 0.8% and 1.3%
• Asia-Pacific fund-flow impactMore than US$15bn of two-way flows and US$4.1bn of net inflowsEstimated potential passive fund flows
• Emerging-market fund-flow impactMore than US$10bn of two-way flows and US$3.8bn of net inflowsEstimated potential passive fund flows
• Net flows in major marketsChina +US$1.5bn; South Korea +US$1.2bn; Taiwan +US$1.2bn; India +US$0.7bn; Japan -US$1.0bnChina and other markets benefit, while Japan faces the greatest selling pressure
• Net flows in major Asia-Pacific sectorsTechnology hardware and semiconductors +US$3.4bn; capital goods +US$0.5bn; banks and automobiles each -US$0.2bn to -US$0.3bnSignificant divergence in sector flows
• China All Cap net passive fund flows+US$1.475bnPurchases of US$2.912bn and sales of US$1.437bn
• Taiwan All Cap net passive fund flows+US$1.216bnPurchases of US$1.698bn and sales of US$481mn

Impact & implications

The report believes this review will further concentrate passive flows in China, South Korea, Taiwan, India, and the Asia-Pacific technology hardware and semiconductor sector, while creating selling pressure on Japan and the banking and automotive sectors. The market reclassifications of Vietnam and Greece will also alter their long-term index classification and tracking-fund demand, although Vietnam's impact will extend through September 2027 because implementation is divided into four tranches. Because the final list may still be revised and historical relative performance has been volatile, estimated flow direction and actual price paths may not be fully synchronized.

Risks

• All indicative changes may still be revised before September 4, 2026, and the final constituents, weights, and fund flows may differ from current estimates.
• The historical performance path of additions relative to deletions has been volatile, particularly for the Emerging Markets All Cap Index, where post-announcement relative performance has not been stable.

What to watch

• Monitor whether FTSE Russell revises the indicative adjustment plan before September 4, 2026.
• Monitor passive trading generated by the formal rebalancing after the market close on September 18, 2026, and the impact on individual stocks with flows that are high relative to average daily trading volume.
• Monitor Vietnam's market-upgrade process, beginning with a 10% initial inclusion factor and continuing in four tranches through September 2027.
• Monitor whether projected net inflows into China, South Korea, Taiwan, and India, and net selling pressure on Japan and the banking and automotive sectors, materialize as estimated.