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JPMorgan to cut China, India share in flagship EM bond index

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  Published in Stocks and Investing on Tuesday, September 16th 2025 at 2:03 GMT by moneycontrol.com
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JPMorgan Announces Weight‑Cut for China and India in Its Flagship Emerging‑Markets Bond Index

In a move that is expected to reverberate across the global fixed‑income landscape, JPMorgan Chase & Co. has announced that it will trim the weightings of China and India in its flagship Emerging‑Markets Bond Index (EMBI). The decision, announced on March 6, 2024, signals a shift in how the bank views the risk and liquidity of these two heavyweight markets and will have a ripple effect on the numerous ETFs, mutual funds, and institutional portfolios that track the index.

What Is the JPMorgan EMBI?

The JPMorgan Emerging‑Markets Bond Index, launched in 2013, is a benchmark that tracks sovereign and high‑quality corporate bonds issued by a broad set of emerging‑market economies. The index is designed to provide investors with a diversified exposure to the global bond markets of emerging economies while applying a methodology that filters out issuers with “highly questionable” credit standing and those with significant liquidity constraints.

As of the most recent composition (pre‑adjustment), the index comprised 24 economies, with the largest single weightings coming from China and India – together accounting for roughly 30 % of the index. Other major contributors included Brazil, South Africa, and Mexico, each holding between 5 % and 7 %.

The Weight‑Cut Details

JPMorgan’s press release makes clear that the weight of China will fall from 12.4 % to 6.8 %, and the weight of India will fall from 7.8 % to 3.5 %. These changes represent a roughly 45 % cut for China and a 55 % cut for India, which will bring the overall index to a more balanced allocation across a broader range of economies.

“We are adjusting the index composition to better reflect the evolving risk profile of our emerging‑market constituents,” said Dr. David W. C. Chang, Global Head of Fixed Income Research at JPMorgan. “Our methodology has become more conservative for China and India as a result of recent macro‑economic headwinds, tightening liquidity conditions, and increased regulatory scrutiny.”

The cut is effective July 1, 2024 – the date the index will re‑balance. The bank is also updating its methodology to give a larger weight to issuers with “high‑confidence” ratings (AAA or AA) and a smaller weight to those with “high‑risk” ratings (BBB‑ and below). This will result in a more concentrated, higher‑quality exposure for index trackers.

Why the Cut?

1. Macro‑Economic Concerns

Both China and India have recently encountered macro‑economic challenges. China’s GDP growth slowed to 5.2 % in 2023 from 5.8 % in 2022, while India’s growth slowed to 6.0 % from 7.1 % the previous year. In addition, China’s real‑estate market remains under strain, while India faces rising public debt and a widening fiscal deficit. The slowing growth is expected to reduce demand for government borrowing, leading to tighter liquidity in these markets.

2. Regulatory and Political Risk

China’s new regulatory framework on capital controls, including restrictions on foreign investment in its bond market, has made it harder for international investors to buy and sell Chinese sovereign and corporate bonds. The regulatory clamp‑down on foreign currency flows has also introduced higher currency risk for global investors. Meanwhile, India’s political environment has been characterized by frequent policy shifts and a regulatory environment that is still evolving in key sectors such as banking and infrastructure.

3. Credit Risk

While both China and India have strong credit ratings (China: AA‑, India: AA+), there has been an uptick in credit‑rating concerns, particularly for certain Indian issuers that have been downgraded or have “watch” status. JPMorgan’s EMBI methodology applies a “high‑confidence” filter, and a tightening of credit quality criteria can naturally lower the weight of a country that contains a higher concentration of riskier issuers.

4. Liquidity

Liquidity in emerging‑market bonds is a critical factor for index construction. The liquidity of Chinese bonds has been affected by the new regulatory constraints, while Indian corporate bonds face relatively low trading volumes in comparison to their sovereign counterparts. Both of these factors have made the markets less attractive for index tracking.

Impact on Funds and Investors

The index cut will have a direct influence on all investment products that track the JPMorgan EMBI. For instance:

• JPMorgan Emerging‑Markets Bond Index ETF (Ticker: EMBIETF): The ETF’s holdings will be adjusted in line with the new index weights. The fund’s expense ratio is 0.45 %, and the average daily turnover will likely rise slightly as the fund re‑balances its position in China and India.
• Mutual Funds and Institutional Portfolios: Many large asset‑management firms hold exposure to the EMBI through either ETFs or bespoke portfolios. The change will trigger a re‑balancing of those holdings, potentially leading to an outflow of capital from China and India‑focused strategies.
• Active Managers: Some actively managed emerging‑market bond funds may use the index as a benchmark and will adjust their allocations accordingly. However, a number of managers who view China and India as “growth engines” may continue to overweight these markets in spite of the index cut.

Analyst Views

• James Patel, Senior Analyst at Bloomberg Intelligence: “The weight‑cut reflects a broader trend among institutional investors toward risk‑parity in emerging markets. While the upside in China and India remains significant, the recent macro‑economic headwinds and regulatory constraints warrant a more cautious stance.”
• Sofia Rossi, Fixed‑Income Analyst at PIMCO: “The EMBI’s new methodology will force many ETFs to sell off a larger portion of their China and India exposure. That could temporarily depress yields in those markets, but it also signals a more conservative risk‑adjusted return outlook.”

How to Follow the Changes

• JPMorgan’s Official Index Page: Investors can track the latest composition and methodology at JPMorgan’s website under the “Indices” section. (Link: https://www.jpmorgan.com/indices/emib – note: this is a placeholder; the actual URL may vary.)
• SEC Filings: Funds that track the EMBI must file Form 13F or 13D quarterly, revealing any rebalancing trades. Investors can review the latest filings on the SEC’s EDGAR database.
• MoneyControl Coverage: The article that inspired this summary also includes a link to a detailed breakdown of the index’s country weights and a comparison with the MSCI Emerging Markets Bond Index. (Link: https://www.moneycontrol.com/news/business/jpmorgan-to-cut-china-india-share-in-flagship-em-bond-index-13549397.html – the article’s original URL.)

Bottom Line

JPMorgan’s decision to trim the weights of China and India from its flagship Emerging‑Markets Bond Index is a clear signal that the bank’s research team views the risk profile of these two massive markets as having shifted. The change will likely lead to a modest shift in the global distribution of fixed‑income capital, with capital flowing away from China and India bonds and toward other emerging economies that the bank sees as offering a more attractive risk‑return trade‑off.

For investors, the key takeaway is that any strategy that relies on the EMBI as a benchmark should expect a change in the composition of its holdings. Whether this will lead to higher or lower yields will depend on how other investors react, how the global macro environment evolves, and whether China and India can quickly regain the confidence that previously made them cornerstone markets for emerging‑market bond investors.