2014-06-11 06:01 AM
GENEVA--(BUSINESS WIRE)--Jun 10, 2014--MSCI Inc. (NYSE:MSCI), a leading provider of indexes and other investment decision support tools worldwide, announced today that China A-shares will not be included in the MSCI Emerging Markets Index as part of the 2014 Annual Market Classification Review, but will remain on the review list as part of the 2015 Annual Market Classification Review.
This decision is based on feedback highlighting remaining investability constraints linked to the QFII and RQFII quota systems received from international institutional investors in a consultation launched in March 2014 on a potential roadmap for inclusion of China A-shares in the MSCI China and MSCI Emerging Markets Indexes. Because of the significant size of the China A-shares market, the possibility of further regulatory reforms and other changes expected in the near term, such as implementation of the Shanghai/Hong Kong Stock Connect program, MSCI believes that it is important to continue to engage with the international investment community on the potential inclusion of the China A-shares in Emerging Markets as part of the 2015 Annual Market Classification Review.
To provide additional tools for international investors investing in the China A-share market, MSCI will introduce by June 27, 2014, the MSCI China A International Index as a standalone index constructed using the MSCI Global Investable Market Index methodology. This index and the associated regional and global combinations can be used as benchmarks by global investors with QFII and RQFII allocations to complement the already extensive series of MSCI China A Indexes.
"Many international investors are already investing in the China A-share market and the amount of quota granted has increased significantly over the past two years," said Remy Briand, MSCI Managing Director and Head of Index Research. "So the A-share market is effectively opening as we speak. MSCI's role is to reflect in its indexes the increasing opportunity set as it occurs. Feedback from investors through this consultation is that they are generally supportive of an inclusion into the index over time but the current quota is still too constraining to warrant an inclusion in the mainstream index right now. We will keep the China A-shares on the list for potential inclusion into Emerging Markets and closely monitor the development of various schemes, such as the Shanghai/Hong Kong Stock Connect program, as they are implemented and used by investors."
MSCI also announced today that the MSCI Korea and MSCI Taiwan indexes will be removed from the review list of country indexes proposed for potential reclassification to Developed Markets. This decision is motivated by the absence of any significant improvements in key areas negatively affecting accessibility in the Korean and Taiwanese equity markets for the past few years. Both indexes may be added back to the review list as soon as there will be meaningful improvements.
MSCI continues to closely monitor the ongoing tensions between Ukraine and Russia. In the case of a potential material deterioration of the situation resulting in restrictions on the accessibility of the Russian and/or Ukrainian equity markets due to introduction of restrictive measures, such as third party economic sanctions or capital or foreign exchange controls, MSCI may launch a public consultation on the treatment of the MSCI Russia and/or MSCI Ukraine Indexes in the MSCI Global Investable Market Indexes.
Following the substantial increase in Egyptian foreign currency reserves, MSCI also announced that it is no longer considering launching a public consultation on a potential exclusion of the MSCI Egypt Index from the MSCI Emerging Markets Index.
Finally, MSCI also released today the 2014 Global Market Accessibility Review for the 82 markets it covers. The classification of markets is a key part of the process of index construction because it drives the composition of the investment opportunity sets to be represented. The approach used by MSCI aims to reflect the views and practices of the international investment community by striking a balance between a country's development and the accessibility of its market while preserving index stability.
MSCI conducts an annual review of all countries included in the MSCI indexes to ensure that they continue to reflect the standards of the underlying market classification. Results of annual reviews are announced each June.
A more detailed version of this announcement has been posted on MSCI's web site at http://www.msci.com/resources/pressreleases/.
After posting the review announcement, MSCI will hold two press conference calls in English, hosted by Remy Briand, Managing Director, Global Head of Index and ESG Research, to answer questions from the media. Note that these press conference calls are restricted to journalists.
MSCI Inc. is a leading provider of investment decision support tools to investors globally, including asset managers, banks, hedge funds and pension funds. MSCI products and services include indexes, portfolio risk and performance analytics, and ESG data and research.
The company's flagship product offerings are: the MSCI indexes with approximately USD 8 trillion estimated to be benchmarked to them on a worldwide basis 1; Barra multi-asset class factor models, portfolio risk and performance analytics; RiskMetrics multi-asset class market and credit risk analytics; IPD real estate information, indexes and analytics; MSCI ESG (environmental, social and governance) Research screening, analysis and ratings; and FEA valuation models and risk management software for the energy and commodities markets. MSCI is headquartered in New York, with research and commercial offices around the world.
As of September 30, 2013, as reported on January 31, 2014, by eVestment, Lipper and Bloomberg
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PUB: 06/10/2014 05:15 PM/DISC: 06/10/2014 05:16 PM