Announcement for June 20, 2018 at 08:37 PM GMT
THIS IS AN ANNOUNCEMENT FOR THE MSCI GLOBAL STANDARD INDEXES
RESULTS OF MSCI 2018 MARKET CLASSIFICATION REVIEW
London - June 20, 2018 - MSCI Inc. (NYSE: MSCI), a leading provider of indexes
and portfolio construction and risk management tools and services for global
investors, announced today that beginning in June 2019, it will include the MSCI
Saudi Arabia Index in the MSCI Emerging Markets Index, the MSCI ACWI Index, and
other global and regional indexes as applicable. This decision follows the
implementation in the Saudi Arabia equity market of a number of regulatory and
operational enhancements which effectively increased the opening of the market
to international institutional investors. The proposal for inclusion received
the support of the vast majority of international institutional investors that
participated in the consultation.
MSCI will include the MSCI Saudi Arabia Index in the MSCI Emerging Markets
Index, representing on a pro forma basis a weight of approximately 2.6% of the
index with 32 securities, following a two-step inclusion process. The first
inclusion step will coincide with the May 2019 Semi-Annual Index Review. The
second step will take place as part of the August 2019 Quarterly Index Review.
Additionally, MSCI announced the reclassification of the MSCI Argentina Index
from Frontier Markets to Emerging Markets status. This decision followed the
broad acceptance of the reclassification proposal by market participants that
took part in the consultation. In particular, international institutional
investors expressed their confidence in the country's ability to maintain
current equity market accessibility conditions, which is a key factor in MSCI's
classification framework. However, in light of the most recent events impacting
the country's foreign exchange situation, MSCI also clarifies that it would
review its reclassification decision were the Argentinian authorities to
introduce any sort of market accessibility restrictions, such as capital or
foreign exchange controls.
The MSCI Argentina Index will be included in the MSCI Emerging Markets Index
coinciding with the May 2019 Semi-Annual Index Review. MSCI will continue to
restrict the inclusion in the index to only foreign listings of Argentinian
companies, such as American Depositary Receipts, as the feedback from
international institutional investors stated that higher liquidity across the
domestic market is needed before considering a shift from offshore to onshore
listings. MSCI will reevaluate this decision as liquidity conditions on the
Buenos Aires Stock Exchange continue to improve.
"By supporting the inclusion of Saudi Arabia and Argentina in Emerging Markets,
international institutional investors confirmed that they are now able and ready
to access and operate in these markets," said Sebastien Lieblich, MSCI Managing
Director and Global Head of Equity Solutions. "These inclusions will result in
the expansion of the global investment opportunity set and allow for greater
diversity in the MSCI Emerging Markets Index, which is important to investors."
Mr. Lieblich added, "International investors were impressed by the speed of
change in the accessibility of the Saudi Arabian equity market and the level of
commitment that the Capital Market Authority (CMA) and the Saudi Stock Exchange
(Tadawul) have demonstrated. Their expectation now is that the current
privatization effort in Saudi Arabia will continue to grow the investable
opportunity set available to them and hence, all other things being equal,
contribute to an increased weight of Saudi Arabia in the Emerging Markets Index
in the future."
Over the past three years, the CMA and Tadawul have implemented several
enhancements that further opened the domestic equity market to international
institutional investors. Following the introduction of a regulation for
qualified foreign financial institutions by the CMA in 2015, the means of access
to the equity market evolved from indirect holdings using derivative
instruments, such as P-notes and/or SWAPs, to direct holdings. This regulation
has since been enhanced twice by the CMA, reflecting feedback from international
institutional investors. Tadawul implemented a complete overhaul of its
operating model, including the introduction of T+2 settlement and delivery
versus payment, in April 2017. This important change was aimed at more closely
aligning Tadawul's operating model with international best practices and further
easing access to the Saudi Arabian equity markets for international
institutional investors. The exchange continued its enhancement efforts with the
introduction of a new closing price mechanism on May 27, 2018, moving from a
value weighted average pricing to a closing auction.
MSCI already calculates the MSCI Saudi Arabia Index, a standalone index, using
Emerging Markets thresholds as per the MSCI Global Investable Market Indexes
methodology. This index can serve as the basis for a pro forma index which is
part of the MSCI ACWI Index Series. MSCI will also launch the MSCI Argentina
Provisional Index, as well as a number of global and regional provisional
indexes, including the MSCI Emerging Markets Provisional Indexes, by September
1, 2018. These indexes will serve to manage the implementation of the inclusion
of Saudi Arabian and Argentinian stocks in investors' portfolios on the schedule
of their choosing. The list of provisional indexes to be launched will be
communicated in the coming weeks. The list of constituents of the MSCI Saudi
Arabia Index, as well as the simulated list of constituents of the MSCI
Argentina Index, using Emerging Markets Index thresholds have been made
available on https://www.msci.com/market-classification.
In addition, MSCI announced that it will include the MSCI Kuwait Index in its
2019 Annual Market Classification Review for a potential reclassification from
Frontier Markets to Emerging Markets status.
MSCI also notes the successful effective implementation of the first inclusion
phase of China A shares in the MSCI Emerging Markets Index. Feedback gathered
from international institutional investors since June 1, 2018, highlight that
the implementation was smooth and no major concerns were raised. As a reminder,
the second implementation phase will coincide with the upcoming August 2018
Quarterly Index Review.
Finally, MSCI today also released the 2018 Global Market Accessibility Review
for the 84 markets it covers.
Each June, MSCI communicates its conclusions, based on discussions with the
international investment community, on the list of markets under review. At that
time, it also announces markets to be reviewed for potential market
reclassification in the upcoming cycle.
For more information, visit us at www.msci.com.
Media Inquiries:
New York Kaitlyn Downing + 1 646 465 6695 pr@msci.com
London Nick Denton +44 (0)7770 272 083 msci@mhpc.com
James Morgan +44 (0)7584 681 475 msci@mhpc.com
Hong Kong James Jarman + 852 3768 4545 ftimsci@fticonsulting.com
MSCI Global Client Service:
EMEA Client Service + 44 20 7618.2222
Americas Client Service 1 888 588 4567 (toll free)
Asia Pacific Client Service + 852 2844 9333
THIS IS AN ANNOUNCEMENT FOR THE MSCI GLOBAL STANDARD INDEXES
End of announcement.
Further announcements may occur as needed.
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