Industry Updates

MSCI and FTSE Russell to remove ‘uninvestable’ Russia stocks from indices

S&P DJI and Morningstar are expected to follow suit

Theo Andrew

MSCI logo under microscope

MSCI said it is pulling Russian securities from its emerging market indices after warning that the equity market is currently “uninvestable”.

Swiftly following the announcement on 2 March, FTSE Russell said Russia would also be deleted across all of its indices while S&P Dow Jones Indices and Morningstar have both launched consultations with a view to taking the same action.

The widely-anticipated decision was first floated earlier this week when MSCI’s head of research Dimitris Melas told ETF Stream that the financial sanctions from western governments had created left the removal of Russian securities as the next “potential step”.

This led to a consultation with the market in which “an overwhelming majority” said that Russian securities should be removed from the MSCI emerging market indices.

In an announcement, MSCI said: “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.”

It added the current crisis has led to a “material deterioration” in the accessibility of the Russian equity market to institutional investors to the point where it no longer meets the market accessibility requirements.

Russia’s central bank suspended stock and derivatives trading this week while Moscow also stopped foreign investors from selling their assets.

It is anticipated that investors are likely to dump their stocks if or when markets do reopen.

MSCI will remove Russia from its indices at the close of trading on 9 March “at a price that is effectively zero” and the securities will be given standalone market status.

FTSE Russell said it would remove the stocks listed on the Moscow Stock Exchange before markets open on Monday.

It added Russia will be classified as an “unclassified” market while the restrictions are in place and will be subject to revaluation once they have been lifted.

Index providers have been rushing to understand the impact of the financial sanctions imposed on Russia since it commend its invasion of Ukraine last week.

Providers including Qontigo, MVIS, ICE and Weiner Boerse have either frozen their Russia benchmarks or deleted Russian securities from their indices.

These developments follow moves by other index providers including JP Morgan, which looks set to delete Russian issuance from two emerging markets ESG indices.

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