Sunday, May 18, 2014 11:09 AM / News
Last week, the MSCI published its additions and deletions to its Frontier Index. Of significance to investors in the Nigerian capital market must be the increase in the presence of Nigerian entities - which moved from 13% to 20% with the addition of Forte Oil Plc and ETI Plc.
The MSCI Frontier Markets Indexes provide broad representation of the equity opportunity set while taking investability requirements into consideration within each market. MSCI classifies 34 countries as Frontier Markets, 26 of which are included in the MSCI Frontier Markets Index.
The MSCI Frontier Market Indexes include large, mid and small cap representation and cover approximately 99% of the investable equity universe across all Frontier Markets countries.
They are constructed using a building block methodology common to all MSCI Global Equity Indexes. The MSCI Frontier Markets Indexes can be segmented by size, sector and geography, allowing for consistent global views and cross regional comparisons. The MSCI Frontier Markets Indexes can also be combined with the MSCI Emerging Markets and MSCI All Country Indexes to create a range of extended regional and global composite indexes.
The MSCI Frontier Markets 100 Index aims to capture the performance of frontier markets while putting a stronger emphasis on tradability compared to the broader parent index, the MSCI Frontier Markets Index. The MSCI Frontier Markets 100 Index is limited to 100 constituents at the time of an index review.
• The new MSCI Frontier Markets 100 Index will be dominated by Kuwait (30% from 20%) and Nigeria (20% from 13%), with Pakistan, Oman, Argentina, Kenya and Morocco in the 5 to 7% range (from 3 to 4%).
• Pakistan is adding 4 stocks (including Lucky Cement), Nigeria is adding two names (ETI and Forte Oil) and Morocco is adding CGI.
• Most of the deletions are almost all coming from the UAE (10 names) and Qatar (13 names).
Transparent, investable and replicable index construction
MSCI Frontier Markets Indexes are calculated and maintained according to the rules-based MSCI Global Investable Market Indexes Methodology. The methodology applies liquidity screens and minimum size references (reflecting the specific structure of countries within the Frontier Markets) to help ensure that the MSCI Frontier Markets Indexes remain both investable and replicable.
MSCI regularly reviews the market classification of all countries included (or under consideration for inclusion) in its global equity universe based on extensive discussions with the investment community. Using the MSCI Market Classification Framework, MSCI examines each country’s economic development, size, liquidity and market accessibility in order to be classified in a given investment universe. Each June, MSCI communicates its conclusions on the list of countries under review and announces the new list of countries, if any, under review for potential market reclassification in the upcoming cycle.
Coinciding with the May 2014 Semi Annual Index Review, Qatar and the United Arab Emirates will be reclassified as Emerging Markets from Frontier Markets.