MSCI Russia - February 2022 Rebalancing Review

MSCI has released the results of the February 2022 rebalancing, as scheduled. Minor adjustments for the share counts of Nornickel and Ozon will be of greatest interest to Russia investors. Russia will see no major adjustments, inclusions or exclusions, as expected. MSCI used a $3.5 bln baseline market cap for Russia, in line with our estimates.> Minor adjustments to Russian stocks included a 2.9% reduction in Nornickel's share count, which will see the stock's weight in the MSCI Russia fall circa 0.2 pp to 6.9% and drive a mandatory minimum passive reallocation out of the stock of some $20 mln. > A 1.8% increase to Ozon's share count will have a negligible effect on the stock's weight and allocations but ever so slightly increase its buffer against exclusion risks going forward - we discuss the stock's still significant risks of falling out of the index in our February preview note.> A 0.3% increase to Yandex's share count is immaterial for the stock's weights and allocations. > The MSCI EM's indexed market cap will rise 0.3% as a result of the 16 additions, nine deletions and 342 variable adjustments in this rebalancing. As usual, the bulk of the changes will take place in APAC markets.> The mentioned share count adjustments will entail Russia's indexed market cap edging down less than 0.2%, and Russia's weight in the MSCI EM effectively remaining flat at 3.4%. The more important factor in Russia's weight slide in recent months has been the correction and underperformance since October, which has coincided with a rise in investors' risk perceptions for the market.> The MSCI World (DM) will see its indexed market cap edge down 7 bps on five additions, three deletions and other variable adjustments. Emerging markets' weight within the ACWI global index will thus edge up from a current 11.4% to a pro forma 11.5%.> Looking ahead, we are currently watching for possible inclusions of MMK and PIK Group in May and risks of exclusions of VK and/or Ozon, which we detailed further in our preview. We continue to think that Novatek will overtake Yandex in the 10-40 rebalancing likely due the evening of February 16. Also, MSCI was again silent on plans to bring the quarterly (February/August) rule set in line with the semiannual (May/November) one, which would imply more volatility in the quarterly rebalancings.