EUR 31.16 For Business Accounts Only

MSCI February 2021 QIR | Limited changes in Feb-21 QIR; FoL hikes in UAE to trigger future rebalancing; FWRY EY on watch list

Number of target companies in Egypt index lowered to 14 from 16, since Nov-20 SAIR, limiting chance for change; FWRY EY on watch list. This limits the chances of further additions in the Small Cap Index. As for the Standard Index, we put FWRY EY on the watch list for possibly replacing SWDY EY in future index reviews (instead of the fierce runner up HRHO EY). FWRY EY’s recent rally and capital increase qualifies it to the Standard Index FFMC criteria; however, it will not fulfil the liquidity criteria before the Aug-21 rebalancing. This depends on MSCI’s FF that will be assigned to FWRY EY. On our figures, if MSCI FF for FAWRY EY is above 45% (vs. current free float c60%), its chance to replace SWDY EY will remain, conditional on SWDY EY falling 50% below the index’s market cap cut-off (gap is currently 54%). Additionally, FWRY EY’s FFMC should surpass 1.8x SWDY EY’s (currently fulfilled 32% above this level). If FWRY EY joins the index, it could see inflows of cUSD140mn (116 DTT).

No change in Kuwait and UAE’s indices; EMAARMLS UH at risk of downgrade once new FOL hikes become effective. As MSCI reflects FAB UH and ETISALAT UH’s FOL hikes, the Standard Index cut-off will rise, downgrading EMAARMLS UH to the Small Cap Index. The possible downgrade of EMAARMLS UH will result in an outflow of USD115mn (32DTT). That said, we expect to see these flows effective in the upcoming SAIR, given that MSCI still did not reflect the FOL hikes.

PETROR AB, CATERING AB are boarder line for potential downgrade to Small Cap Index; MOUWASAT AB on watch list for possible future upgrade. Based on our calculations, PETROR AB and CATERING AB could be downgraded to Saudi’s Small Cap Index in the Feb QIR, resulting in outflows of USD14mn (5DTT) and USD27mn (9DTT), respectively. We do not expect an upgrade for MOUWASAT AB, given the rise in the GMSR cut-off. However, we will keep monitoring the stock’s performance for a possible future upgrade to the Standard Index. A possible addition of MRDS OD to Qatar’s Small Cap Index may trigger inflows of USD15mn (2DTT), in our view.

MSCI proposes additional screening for potential additions and size-migrations to Standard Indexes exhibiting extreme price increases. We view the proposal positively, as it aims to reduce turnover. An extreme price increase is the excess returns over the MSCI ACWI IMI country sector mean on the cut-off date of at least 100%, 200%, or 400% for one, two, or three months, respectively, as proposed by the MSCI. Securities meeting the criteria for extreme price increases would not be eligible for inclusion into the Standard Index nor migrate to the Standard Index from Small Cap. Large IPOs would be excluded from the assessment.