Index provider Morgan Stanley Capital International (MSCI) has announced that it is keeping Iceland on the review list for potential reclassification to Frontier Markets status as part of the MSCI 2020 Market Classification Review.
MSCI undertook a consultation with market participants and concluded that Iceland will remain as a Standalone Market within the MSCI universe, but will still be considered for an upgrade to a Frontier Market, with the result of the MSCI 2020 Market Classification Review determining whether or not Iceland will be reclassified and sit with other Frontier Markets such as Vietnam, Nigeria and Kazakhstan.
The announcement stated that despite the Iceland equity market meeting most of the accessibility criteria required for it to be classified as a Frontier Market, further analysis and feedback from market participants and institutional investors highlighted concerns regarding the following:
- Foreign currency reporting process.
- Availability of brokers.
- Removal of capital controls that have taken place relatively recently.
MSCI will continue to engage with the investment community on Iceland’s potential reclassification to a Frontier Market before the release of the MSCI 2020 Market Classification Review.
If Iceland does get promoted to the Frontier Markets category, two of its companies – Marel and Arion Banki – are the most likely to be included in the MSCI Frontier Markets Index, with an approximate weight in the index of 4.7%, the sixth largest constituent behind Vietnam (25.2%), Morocco (13.4%), Nigeria (9.2%), Kenya (8.0%), Romania (6.9%).
For a full list of Frontier Markets and their classifications, click here.