MSCI Equity Indexes February 2024 Index Review
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Insights
The recent index review by MSCI Inc. reveals significant rebalancing across various equity indexes, which can have material effects on the composition of portfolios and the allocation of capital in global markets. Notably, the addition and deletion of securities within the MSCI Global Standard Indexes, particularly the MSCI ACWI Index, can lead to shifts in investor focus and capital flows. Large-cap additions like Samsara Inc., Corebridge Financial and Applovin Corp in the U.S. and Midea Group in China, indicate a recognition of growing market capitalizations and potentially increasing investor interest in these companies.
From a market research perspective, the reclassification of Nigeria from Frontier Market to Standalone Market status is significant. It signals a change in market accessibility and risk profile, which could influence investor perception and the strategic allocation for emerging market investors. This reclassification, along with the deletion of Nigerian securities at nominal prices, could have implications for the liquidity and valuation of Nigerian assets in the short term.
Moreover, the changes in the MSCI China A Onshore Indexes and the MSCI China All Shares Indexes reflect ongoing developments in the Chinese market. As the Chinese economy continues to evolve, the addition and deletion of companies from these indexes could be indicative of broader economic trends, such as sectoral shifts or changes in the regulatory environment.
The index review's impact on the stock market can be multi-faceted. For institutional investors who track these indexes, rebalancing to match the new index compositions will necessitate buying and selling of securities. This often results in increased trading volumes and can lead to price volatility for the securities being added or removed. For individual stocks, inclusion in an index like the MSCI World or MSCI Emerging Markets can increase visibility and demand, potentially leading to higher stock prices.
It is also important to consider the effect on passive investment vehicles, such as ETFs and index funds, which are designed to replicate the performance of these indexes. Adjustments to these funds' holdings can lead to significant capital inflows or outflows from the affected securities. The deletions, particularly the 101 securities from the MSCI ACWI Index, could result in downward pressure on those stocks as index funds sell those positions.
Lastly, the changes within the MSCI US Equity Indexes, specifically the MSCI US Mid Cap 450 and Small Cap 1750 Indexes, highlight the dynamic nature of the U.S. equity market. Additions to these indexes, such as Enphase Energy and Affirm Holdings, may benefit from increased investor exposure and the associated capital inflows.
The updates to MSCI's indexes reflect broader economic trends and can have implications for economic sectors and national economies. For instance, the inclusion of new securities in the MSCI Global Standard Indexes suggests a rebalancing towards companies that may be better positioned to capture market growth or are representative of emerging industries. This could indicate underlying economic shifts, such as technological advancements or changing consumer behaviors.
The reclassification of Nigeria and the market accessibility issues noted in Bangladesh, Egypt and Kenya highlight the varying degrees of economic stability and market maturity across different regions. These decisions by MSCI can affect foreign direct investment flows into these countries and may alter the risk assessment for international investors considering these markets.
Furthermore, the adjustments to the MSCI China A Onshore and All Shares Indexes may be interpreted as a response to the evolving regulatory landscape and growth prospects within China. As the world's second-largest economy continues to open up its financial markets, these index adjustments will play a role in guiding international capital towards Chinese equities that are seen as compliant with global investment standards.
MSCI Global Standard Indexes: Twenty-four securities will be added to and 101 securities will be deleted from the MSCI ACWI Index. The three largest additions to the MSCI World Index measured by full company market capitalization will be Samsara A (
MSCI Global Small Cap Indexes: There will be 189 additions to and 118 deletions from the MSCI ACWI Small Cap Index.
MSCI Global Investable Market Indexes: There will be 161 additions to and 167 deletions from the MSCI ACWI Investable Market Index (IMI).
MSCI Global All Cap Indexes: There will be 126 additions to and 104 deletions from the MSCI World All Cap Index.
MSCI Frontier Markets Indexes: There will be nine additions to and eleven deletions from the MSCI Frontier Markets Index. The three largest additions to the MSCI Frontier Markets Index measured by full company market capitalization will be Casablanca Travaux Generaux De Construction De SA (
In light of currently observed market accessibility issues, MSCI will not implement changes as part of this Index Review for any securities classified in
In addition, MSCI will reclassify
MSCI Global Islamic Indexes: Twenty-nine securities will be added to and 31 securities will be deleted from the MSCI ACWI Islamic Index. The three largest additions to the MSCI ACWI Islamic Index measured by full company market capitalization will be Servicenow (
MSCI US Equity Indexes: There will be no securities added to and one security deleted from the MSCI US Large Cap 300 Index.
Four securities will be added to and four securities will be deleted from the MSCI US Mid Cap 450 Index. The three largest additions to the MSCI US Mid Cap 450 Index measured by full company market capitalization will be Enphase Energy, Affirm Holdings A and Karuna Therapeutics.
Four securities will be added to and three securities will be deleted from the MSCI US Small Cap 1750 Index. The three largest additions to the MSCI US Small Cap 1750 Index measured by full company market capitalization will be Cable One, Hertz Global Holdings and Agilon Health.
There will be no additions to and no deletions from the MSCI US Micro Cap Index.
For the MSCI US Investable Market Value Index, there will be one addition or upward change in Value Inclusion Factor (VIFs), and one deletion or downward change in VIFs. For the MSCI US Investable Market Growth Index, there will be no additions or upward changes in Growth Inclusion Factors (GIFs), and one deletion or downward change in GIFs.
MSCI US REIT Index: There will be no additions to and no deletions from the MSCI US REIT Index.
MSCI China A Onshore Indexes: There will be three additions to and 74 deletions from the MSCI China A Onshore Index. The three largest additions to the MSCI China A Onshore Index will be China Merchants Expressway Network Technology Holdings Co A, Sicc Co A and Smartsens Technology (
MSCI China All Shares Indexes: There will be four additions to and 76 deletions from the MSCI China All Shares Index. The three largest additions to the MSCI China All Shares Index will be Midea Group Co A, China Merchants Expressway Network Technology Holdings Co A and Giant Biogene Holding. There will be 185 additions to and 62 deletions from the MSCI China All Shares Small Cap Index.
For more information, please visit at www.msci.com.
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FAQ
What are some of the notable additions to the MSCI World Index in the February 2024 Index Review?
Which countries will not see changes in the Index Review due to market accessibility issues?
Which country is reclassified from Frontier Market status to Standalone Market status in the February 2024 Index Review?
How many securities will be added to the MSCI ACWI Islamic Index in the February 2024 Index Review?
Are there any additions to the MSCI US REIT Index in the February 2024 Index Review?
