MSCI Inc. Removes Russian Index Constituents From Emerging Market Indices

On March 2, 2022, MSCI Inc., the index sponsor of the MSCI Emerging Markets Index ("MXEF") and other indices, announced that it will reclassify Russian equity indices from emerging markets to a standalone status. The change will be effective March 9, 2022. MSCI's decision was in response to a consultation requesting feedback from market participants on the appropriate treatment of the Russian equity market within the MSCI indices. During the consultation, MSCI received feedback from a large number of global market participants, including asset owners, asset managers, broker-dealers and exchanges with an overwhelming majority confirming that the Russian equity market is currently "uninvestable," and that Russian securities should be removed from the MXEF.

S&P Dow Jones Indices ("S&P") made a similar announcement on March 4, 2022, stating that they would remove all stocks listed and/or domiciled in Russia from its standard equity indices at a price of zero, effective March 9, 2022. S&P also will reclassify Russia from an emerging market to standalone status on March 9, 2022.¹

FTSE Russell announced, on February 24, 2022, that none of the current index constituents of the FTSE Russell Equity Indices fall within the scope of recent sanctions on individuals and entities by the United Kingdom or the United States. However, FTSE Russell is evaluating the effect of more recent UK sanctions on its indices.

Issuers of notes linked to the affected indices, such as the MXEF or exchange traded funds, such as the EEM, may want to revisit their risk factors to address the uncertainties arising from the Russo-Ukrainian war.

Footnote

1 The S&P announcement is available at: 1450352_spdjiconsultationonsanctionsandrussiamarketaccessibilityresults3-4-2022.pdf (spglobal.com).

Originally published in REVERSEinquiries: Volume 05, Issue 01.
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