FTSE Russell amends emerging, frontier markets country classification

On the 09/27/19 at 7:19AM


Adrien Paredes-Vanheule

London stock exchange's index provider FTSE Russell has announced a few amendments to its country classification in emerging and frontier markets for its equity and bond indices following review.

On the equity side, Romania, currently a frontier market, will become a secondary emerging market as from September 2020. In the meantime, Tanzania, today unclassified, will become a frontier market in FTSE Russell's equity country classification. Vietnam remains on the watch list for a potential change from a frontier status to secondary emerging market. Argentina has been withdrawn from the list for a potential reclassification as secondary emerging market due to the imposition of capital controls.

Joti Rana, head of index governance and policy, Americas said, “FTSE Russell continues to engage with the Argentinean market authorities to ascertain the longevity of the recently introduced capital controls.”

As for the fixed income segment, the main change in the country classification remains the addition of Israel to the FTSE World Government Bond Index (WGBI) and FTSE World Inflation Linked Securities Index as from April 2020.

Israel local currency govies will therefore be added to the index from 1 April 2020 and are projected to comprise 0.29% of the index on a market value weighted basis as of August 2019 based on 13 bonds with $68.2bn in market value.

ILS-denominated linkers will also be added to the FTSE World Inflation Linked Securities Index (WorldILSI) from 1 April 2020, and are projected to comprise 1.78% of the index on a market value weighted basis.

FTSE Russell, which assigns a market accessibility level of 0, 1 or 2, with 2 representing the highest level of accessibility for foreign investors, has kept China and Malaysia on its watch list. 

China is awaiting a potential upgrade to market accessibility level 2 and feedback of the Chinese govies market's users will determine it. As for Malaysia, it is reviewed for potential downgrade from its current market accessibility level of 2. FTSE Russell will continue to engage with market participants to understand the practical impact of recent initiatives announced by Bank Negara Malaysia to improve market liquidity and accessibility.

FTSE Russell said it will provide further updates as appropriate after the interim review in March 2020.

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