MSCI Russia - February Rebalancing Preview

MSCI will release the results of its February quarterly rebalancing after markets close on Tuesday, February 9. The announced changes come into effect after markets close on February 26. In this rebalancing, we expect MSCI to use a baseline market cap threshold for Russia of $4.6-4.8 bln.> TCS's prospects for promotion in February are limited, the case for May looks more solid. TCS has rocketed more than 20% since founder Oleg Tinkov announced conversion of his shares in early January. In the first days of the MSCI pricing period for February's rebalancing, the GDR closed above the levels we expect to be necessary to be promoted from the small-cap into the standard indexes, but it has since then crossed below our estimated threshold. With the most critical part of the pricing period now past, we think the stock is slightly more likely than not to be promoted in February. Were it to be promoted at current pricing, TCS would come to comprise 2.0% of the MSCI Russia Standard Index. If not promoted in February, current pricing suggests an easier path to promotion in May.> Ozon needs to outperform to enter the indexes in May, while February looks too early. Under our base-case assumption of a 20% float coefficient, Ozon is some 7% below the level we expect to be required for entry into the MSCI Russia Standard in May's semiannual rebalancing. Outperformance between now and the last ten trading days of April would push the stock into the indexes, as would what we consider a low-probability scenario that MSCI credits a portion of the pre-IPO investors into the free float. Were it to reach current forecast minimums by that time, Ozon would take up 1.0% of the MSCI Russia Standard (or more).