Report
Malek Elbahabety ...
  • Noaman Khalid
EUR 27.72 For Business Accounts Only

MSCI February 2020 QIR playbook: Expect no changes in Feb-20 QIR rebalance; EMIRATES UH inclusion may be the only surprise

Expect no changes in the upcoming rebalance, EMIRATES UH could surprise. EMIRATES UH currently passes the 1.8x FMC and FFMC cut-offs required for quarterly rebalances, standing at 6.3x FMC cut-off and 2.52x FFMC cut-off, respectively. In terms of the liquidity requirements, the stock falls short by one quarter only, with 1Q19 liquidity standing at 9.4%, below the required 15%. This leads to our base case scenario of an inclusion in May-20. However, we see a possibility that MSCI could disregard the failing quarter and include the stock in the Feb-20 rebalance, similar to the unexpected 0.5x adjustment removal for NBK KK that took place in the Nov-19 SAIR. In case of its inclusion in the upcoming rebalance, EMIRATES UH could capture 11% of the UAE index, with potential inflows of cUSD340mn (77 DTT).

What happened with NBK KK? MSCI implemented an adjustment factor of 0.5x to NBK KK in Feb-19, as the stock’s ATVR was more than halved post its FOL increase to 100% from 49%. We had expected it would take one year for NBK KK’s ATVR to surpass the 10% level, setting Feb-20 as our initial expectation for the removal of the 0.5x adjustment factor. However, MSCI surprised the market and disregarded one quarter of failing liquidity, removing the adjustment factor in Nov-19. NBK KK’s share price rerated by c5% in the week following the announcement.

ADIB UH inclusion likely in May-20, pending regulatory and shareholder approval. ADIB UH is currently awaiting approval to increase its foreign inclusion factor to 40% from 20%. This is key for the stock to pass the current FMC and FFMC cut-offs, standing at USD3.73bn and USD1.86, respectively, which is the upper GSMR. ADIB UH’s FFMC currently stands at USD1.38bn, failing the cut-off. We expect ADIB UH’s inclusion to be a May-20 story, potentially witnessing inflows of USD175mn (79 DTT).

Potential FOL hike in the UAE to benefit ETISALAT UH, DIB UH, EMAAR UH, and ALDAR UH. Companies that increase their FOL to 100% will benefit, if their current FF percentage is above the current FOL, leaving room for inflows. This applies to four stocks only within the MSCI index, namely ETISALAT UH, DIB UH, ALDAR UH, and EMAAR UH. If these stocks’ FOLs are raised to 100%, we estimate the index to witness total inflows of USD1.2bn, with USD712mn going to ETISALAT UH, USD373mn to DIB UH, USD120mn to EMAAR UH, and 6.43mn to ALDAR UH.

Provider
CI Capital
CI Capital

CI Capital is a diversified financial services group and Egypt’s leading provider of leasing, microfinance, and investment banking products and services.

Through its headquarters in Cairo and presence in New York and Dubai, CI Capital offers a wide range of financial solutions to a diversified client base that include global and regional institutions and family offices, large corporates, SMEs, and high net worth and individual investors.

CI Capital leverages its full-fledged investment banking platform to provide market leading capital raising and M&A advisory, asset management, securities brokerage, custody and research. Through its subsidiary Corplease, CI Capital offers comprehensive leasing solutions, including finance and operating leases, and sale and leaseback, serving a wide range of corporate clients and SMEs. In addition, CI Capital offers microfinance lending through Egypt’s first licensed MFI, Reefy.

The Group has over 1,700 employees, led by a team of professionals who are among the most experienced in the industry, with complementary backgrounds and skill sets and a deep understanding of local market dynamics.

CI Capital has been recognized as the “Best Investment Bank in Egypt” by EMEA Finance for four years running from 2013-2016, and by Global Finance in 2014 and 2015.

Analysts
Malek Elbahabety

Noaman Khalid

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