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MSCI 2022 Market Classification Review

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MSCI Inc. (NYSE: MSCI), a leading provider of critical decision support tools and services for the global investment community, announced today the results of the MSCI 2022 Market Classification Review.

“A significant portion of the deteriorations in market accessibility ratings during this year’s review were caused by the negative developments in Russia, which led to a complete inaccessibility of its equity market to international institutional investors. This resulted in the reclassification of the MSCI Russia Indexes from Emerging Markets to Standalone Market status in March 2022,” said Dr. Dimitris Melas, Global Head of Index Research and Product Development and Chairman of the MSCI Index Policy Committee.

Consultation on Potential Reclassification of the MSCI Nigeria Indexes to Standalone Markets Status

MSCI announced today the launch of a consultation on a proposal for potential reclassification of the MSCI Nigeria Indexes from Frontier Markets to Standalone Markets status.

Since March 2020, accessibility issues have persisted in the Nigerian equity market. The repatriation of funds from investments in the market remains extremely difficult for foreign investors due to low liquidity in the Nigerian foreign exchange market. As a result, market participants have continuously expressed concerns related to the investability and replicability of the MSCI Nigeria Indexes.

“There has been a continual and severe deterioration in the ability to repatriate funds from Nigeria. As a result, since May 2020, a special treatment has been in place to reduce the number of potential changes in the relevant MSCI Equity Indexes,” said Mr. Craig Feldman, Global Head of Index Management Research and member of the MSCI Index Policy Committee. “Given the prolonged nature of the issues affecting the market’s accessibility, we have put forth the consultation to reclassify the MSCI Nigeria Indexes from Frontier Markets to Standalone Markets status.”

MSCI welcomes feedback from market participants on this reclassification proposal until August 31, 2022.

Recent Developments in Securities’ Settlement Cycles

In 2022, India began transitioning its settlement cycle from T+2 to T+1. Additionally, both the US and Canada announced last year their proposals to migrate to a shorter settlement cycle, from T+2 to T+1.

“Across selected equity markets, we have been observing that clearing and settlement mechanisms are transitioning towards shorter cycles,” said Mr. Feldman. “While in principle, investors may benefit from shorter settlement cycles, it is important to assess whether the ramifications of such changes introduce any obstacles such as pre-funding requirements or additional operational costs.”

MSCI continues to closely monitor these developments and their potential impact and will release further communications as warranted.

Market Accessibility in Sri Lanka

Amidst the ongoing economic crisis in Sri Lanka, and as a result of a lack of liquidity in the foreign exchange market, fund repatriation issues in the country’s equity market began to emerge this year. In response to these developments, in May 2022, MSCI introduced a special treatment to reduce the number of potential changes in the MSCI Sri Lanka Indexes.

MSCI continues to welcome feedback on the level of market accessibility of the Sri Lankan equity market and will consult with market participants to gather feedback if there are any further developments.

Deterioration in the Market Accessibility of the Russian Equity Market

A number of significant developments have led to a material deterioration in the accessibility of the Russian equity market. These included sanctions from several jurisdictions, restrictions on foreign investors’ ability to transact in securities on the Moscow Stock Exchange, and deterioration in the convertibility of the Russian Ruble into foreign currencies.

As a result, and following a consultation with the international investment community, MSCI reclassified the MSCI Russia Indexes from Emerging Markets to Standalone Markets status in March 2022.

MSCI will continue to monitor the developments in the Russian equity market’s accessibility and will consult with market participants if there are any relevant changes in the market’s conditions.

-Ends-

About MSCI

MSCI is a leading provider of critical decision support tools and services for the global investment community. With over 50 years of expertise in research, data, and technology, we power better investment decisions by enabling clients to understand and analyze key drivers of risk and return and confidently build more effective portfolios. We create industry-leading research-enhanced solutions that clients use to gain insight into and improve transparency across the investment process. To learn more, please visit www.msci.com.

The process for submitting a formal index complaint can be found on the index regulation page of MSCI’s website at: https://www.msci.com/index-regulation.

This document and all of the information contained in it, including without limitation all text, data, graphs, charts (collectively, the “Information”) is the property of MSCI Inc. or its subsidiaries (collectively, “MSCI”), or MSCI’s licensors, direct or indirect suppliers or any third party involved in making or compiling any Information (collectively, with MSCI, the “Information Providers”) and is provided for informational purposes only. The Information may not be modified, reverse-engineered, reproduced or redisseminated in whole or in part without prior written permission from MSCI. All rights in the Information are reserved by MSCI and/or its Information Providers.

The Information may not be used to create derivative works or to verify or correct other data or information. For example (but without limitation), the Information may not be used to create indexes, databases, risk models, analytics, software, or in connection with the issuing, offering, sponsoring, managing or marketing of any securities, portfolios, financial products or other investment vehicles utilizing or based on, linked to, tracking or otherwise derived from the Information or any other MSCI data, information, products or services.

The user of the Information assumes the entire risk of any use it may make or permit to be made of the Information. NONE OF THE INFORMATION PROVIDERS MAKES ANY EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE INFORMATION (OR THE RESULTS TO BE OBTAINED BY THE USE THEREOF), AND TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH INFORMATION PROVIDER EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF ORIGINALITY, ACCURACY, TIMELINESS, NON-INFRINGEMENT, COMPLETENESS, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE) WITH RESPECT TO ANY OF THE INFORMATION.

Without limiting any of the foregoing and to the maximum extent permitted by applicable law, in no event shall any Information Provider have any liability regarding any of the Information for any direct, indirect, special, punitive, consequential (including lost profits) or any other damages even if notified of the possibility of such damages. The foregoing shall not exclude or limit any liability that may not by applicable law be excluded or limited, including without limitation (as applicable), any liability for death or personal injury to the extent that such injury results from the negligence or willful default of itself, its servants, agents or sub-contractors.

Information containing any historical information, data or analysis should not be taken as an indication or guarantee of any future performance, analysis, forecast or prediction. Past performance does not guarantee future results.

The Information should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. All Information is impersonal and not tailored to the needs of any person, entity, or group of persons.

None of the Information constitutes an offer to sell (or a solicitation of an offer to buy), any security, financial product or other investment vehicle or any trading strategy.

It is not possible to invest directly in an index. Exposure to an asset class or trading strategy or other category represented by an index is only available through third party investable instruments (if any) based on that index. MSCI does not issue, sponsor, endorse, market, offer, review or otherwise express any opinion regarding any fund, ETF, derivative or other security, investment, financial product or trading strategy that is based on, linked to or seeks to provide an investment return related to the performance of any MSCI index (collectively, “Index Linked Investments”). MSCI makes no assurance that any Index Linked Investments will accurately track index performance or provide positive investment returns. MSCI Inc. is not an investment adviser or fiduciary and MSCI makes no representation regarding the advisability of investing in any Index Linked Investments.

Index returns do not represent the results of actual trading of investible assets/securities. MSCI maintains and calculates indexes, but does not manage actual assets. Index returns do not reflect payment of any sales charges or fees an investor may pay to purchase the securities underlying the index or Index Linked Investments. The imposition of these fees and charges would cause the performance of an Index Linked Investment to be different than the MSCI index performance.

The Information may contain back tested data. Back-tested performance is not actual performance, but is hypothetical. There are frequently material differences between back tested performance results and actual results subsequently achieved by any investment strategy.

Constituents of MSCI equity indexes are listed companies, which are included in or excluded from the indexes according to the application of the relevant index methodologies. Accordingly, constituents in MSCI equity indexes may include MSCI Inc., clients of MSCI or suppliers to MSCI. Inclusion of a security within an MSCI index is not a recommendation by MSCI to buy, sell, or hold such security, nor is it considered to be investment advice.

Data and information produced by various affiliates of MSCI Inc., including MSCI ESG Research LLC and Barra LLC, may be used in calculating certain MSCI indexes. More information can be found in the relevant index methodologies on www.msci.com.

MSCI receives compensation in connection with licensing its indexes to third parties. MSCI Inc.’s revenue includes fees based on assets in Index Linked Investments. Information can be found in MSCI Inc.’s company filings on the Investor Relations section of www.msci.com.

MSCI ESG Research LLC is a Registered Investment Adviser under the Investment Advisers Act of 1940 and a subsidiary of MSCI Inc. Except with respect to any applicable products or services from MSCI ESG Research, neither MSCI nor any of its products or services recommends, endorses, approves or otherwise expresses any opinion regarding any issuer, securities, financial products or instruments or trading strategies and MSCI’s products or services are not intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Issuers mentioned or included in any MSCI ESG Research materials may include MSCI Inc., clients of MSCI or suppliers to MSCI, and may also purchase research or other products or services from MSCI ESG Research. MSCI ESG Research materials, including materials utilized in any MSCI ESG Indexes or other products, have not been submitted to, nor received approval from, the United States Securities and Exchange Commission or any other regulatory body.

Any use of or access to products, services or information of MSCI requires a license from MSCI. MSCI, Barra, RiskMetrics, IPD and other MSCI brands and product names are the trademarks, service marks, or registered trademarks of MSCI or its subsidiaries in the United States and other jurisdictions. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and Standard & Poor’s. “Global Industry Classification Standard (GICS)” is a service mark of MSCI and Standard & Poor’s.

MIFID2/MIFIR notice: MSCI ESG Research LLC does not distribute or act as an intermediary for financial instruments or structured deposits, nor does it deal on its own account, provide execution services for others or manage client accounts. No MSCI ESG Research product or service supports, promotes or is intended to support or promote any such activity. MSCI ESG Research is an independent provider of ESG data, reports and ratings based on published methodologies and available to clients on a subscription basis. We do not provide custom or one-off ratings or recommendations of securities or other financial instruments upon request.

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