MSCI Russia - August 2020 Rebalancing Preview

MSCI will release the results of the August quarterly rebalancing after markets close on August 12. The results take effect after markets close on August 31. For Russia, the main event to watch is the potential inclusion of Yandex. We also note high likelihoods at current pricing for Mail.ru Group to enter the indexes in November and MMK to depart.> Yandex still likely to enter in this August rebalancing. We reiterate our view that Yandex will enter the index in this rebalancing on the back of its rise in Moscow liquidity over the past year. As detailed inside, we expect the stock to enter the indexes with a weight of 8.6% of the MSCI Russia at current prices, while allowing for what we consider a slightly less likely scenario of a weight of 8.1%. The other risk to our view, which we consider limited, is that MSCI could use a lower free-float coefficient than the 95% we forecast.> Mail.ru Group increasingly likely to enter in the November rebalancing. Since debuting its Moscow cross-listing in early July, Mail.ru Group's Moscow-based liquidity has already been more than twice the minimum we think is necessary to enter the MSCI indexes in the November semiannual rebalancing. We expect the stock to enter with an MSCI Russia index weight of 1.4-1.6%. This scenario would be at risk if Moscow liquidity is not sustained in August and September.> MMK at risk of exclusion in November. After becoming the smallest constituent following Transneft's departure in May, MMK has underperformed both the Russian and EM MSCI benchmarks. It now appears at risk of exclusion in November, with recent pricing 7-12% below required minimums.