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MSCI May 2021 SAIR playbook | FWRY EY on its way to Standard Index; GCC FoL hikes to trigger few changes

High probability of FWRY EY replacing SWDY EY in Egypt Standard Index. FWRY EY’s current FFMC qualifies it to the Standard Index FFMC criteria of surpassing SWDY’s FFMC by 1.5x, conditional upon SWDY EY falling 33% below the index’s market cap cut-off (currently 51%). This is subject to MSCI assigning a Foreign Factor (FF) to FWRY EY. We calculate FWRY’s FF at 30% (considering its ownership structure), which currently puts its FFMC at c13% above SWDY’s EY. If the replacement takes place, it would trigger passive inflows estimated at USD190mn (94 DTT), while SWDY EY could see outflows of USD56mn (70 DTT). 

MOUWASAT AB strong candidate for an upgrade, replacing CATERING AB; PETROR AB, EMARR AB on watch list for possible downgrade. MOUWASAT AB’s price surge qualifies it for an upgrade to the Standard Index, which we estimate to witness passive inflows of USD43mn (11 DTT). Meanwhile, we believe CATERING AB could potentially be downgraded to the Small Index, triggering outflows of USD21mn (6 DTT). PETROR AB and EMAAR AB are borderline on our watch list for possible downgrades.

Possible inclusion of ADNOCDIS UH to Standard Index, along with FoL changes to move EMAARMLS UH to Small Index. ADNOCDIS UH may have an opportunity to be included in the Standard Index, on doubling its FF to 20%, as of Sep-20. This is conditioned by MSCI assigning a FF to the stock. Inclusion could result in inflows of USD245mn (13 DTT). There is a high chance for the MSCI to reflect ETISALAT UH’s FoL hike to 40%, triggering inflows of USD187mn (12 DTT). These changes would downgrade EMAARMLS UH to the Small Index, with possible outflows of USD9.2mn (3 DTT). We flag FAB UH’s update of shareholder structure, splitting the ruling family’s stake at 15.3% and other UAE entities at 31.6%, potentially resulting in the MSCI lifting FF to 40% from 25% currently, triggering inflows of USD390mn (6 DTT).

Expect limited changes in Qatar and Kuwait indices; Eye Qatar’s approved draft law, allowing full foreign ownership. A possible addition of MRDS OD and WDAM OD to Qatar’s Small Index may trigger inflows of USD12.7mn (4 DTT) and USD9mn (23 DTT), respectively. Allowing full foreign ownership would mostly benefit CBQK OD, QIIK OD, and QIBK OD in future rebalancing, given their large deviation between FF and FoL. We note that GBK KK is borderline for deletion from the Kuwait Standard Index, possibly witnessing outflows of USD68mn (11 DTT).