MSCI Russia - November 2021 Rebalancing Review

MSCI last night announced the results of the November 2021 rebalancing as scheduled. The rebalancing comes into effect after markets close on Tuesday, November 30. One significant change was announced for Russia, the inclusion of Rusal. MSCI used a $5.2 bln market cap threshold for the Russia Standard Index, higher than our estimate.> Rusal joins the MSCI Russia and EM as expected. The company enters the indexes with a 20% free-float coefficient, a weight of 1.0% in the MSCI Russia and 0.04% in the MSCI EM. We expect minimum reallocation to the stock from passive funds tracking the MSCI EM and derivatives of some $124 mln, equivalent to 2.9 times the combined Hong Kong and Moscow ADTs. > Ozon, Yandex and Polymetal see share count adjustments. Ozon's is most significant at 4.4%, but will raise its Russia index weight just barely, from a pro forma 0.70% to 0.73%. Yandex's share count is increased 0.9% and Polymetal's 0.01%, meaning no material change to index weights and allocations. Yandex's expanded share count implies the stock is currently 12% ahead of Novatek in the race for the heavyweight spot in the 10-40 index, which will likely be priced after global closes on November 18.> PIK Group and MMK not joining the indexes. MSCI assigned both companies pro forma free-float coefficients of 20%, implying that the index provider evaluated both companies without inclusion of their September-October SPOs, as expected. The stocks were 9% and 18% below the required minimum free floats for entry to the Standard indexes, respectively. Were MSCI to have incorporated the companies' recent SPOs and raised the float coefficients to 25%, the stocks would have been 14% and 6% above the required minimums. Hence, both stocks are early candidates for inclusion in the May rebalancing, when MSCI reevaluates global free float in detail. We discuss the scenarios further in our preview note.> Segezha, United Medical Group and Mechel pref added to small-caps, NCSP excluded. The additions' pro forma weights of 0.11-0.18% in the IMI indexes imply respective reallocation from IMI and small-cap trackers of $7 mln (1.0 times 30-day ADT), $6 mln (10.5 times) and $5 mln (0.6 times). NCSP's exclusion implies outflow of $5 mln, equivalent to 15 times the 30-day Moscow ADT.> Other country weight adjustments. The MSCI EM expands 1.3% pro forma with the addition of 81 stocks and deletion of 67. The majority of both changes are in China, as usual. Adjustments to the Russia index expand the index 1.1%, leaving Russia's weight in the MSCI EM effectively stable at 4.0%. As the DM index only expands 0.2%, EMs' implied share of the all-world ACWI edged up from 11.8% to 12.0%. Argentina and Pakistan are also scheduled to depart the EM index base, as discussed in more detail in our preview note, while MSCI also announced that they are reviewing the eligibility of frontier market Sri Lanka due to issues of market accessibility.