In its semi-annual Frontier 50 Index Review for September 2020, FTSE have announced several key changes to the composition of its Frontier Markets Indexes, with the inclusion of Peru and removal of Romania being the major talking points.
|National Atomic Company Kazatopmrom||Kazakhstan|
|Ciments du Marco||Morocco|
|MTN Nigeria Communications||Nigeria|
|Volcan B C1||Peru|
|Luz del Sur||Peru|
|Union Andina de Cementos SAA||Peru|
|Hoa Phat Group JSC||Vietnam|
|Masan Group Corp||Vietnam|
|No Va Land Investment Group||Vietnam|
14 new companies were added to the FTSE Frontier 50 Index, the most notable being the six Peruvian stocks that have now entered the Index. FTSE stripped Peru of its Secondary Emerging Markets status in its March 2020 Interim Country Classification Review after stating that the only remaining Peruvian constituent in the FTSE Global All Cap Index no longer satisfied the updated minimum market cap and securities count criterion for it to retain its status. At the end of March 2020, Peru only comprised of 0.02% in the FTSE Emerging Markets Index.
Buenaventura, InRetail Peru, Volcan, Alicorp, Luz del Sur and Union Andina de Cementos are the stocks that will represent Peru in the FTSE Frontier 50 Index.
Vietnam saw three new additions to the Index: Hoa Phat Group, Masan Group Corp and No Va Land Investment Group, with the latter being reinstated in the Index after being removed last year, despite been included in 2017.
MTN Nigeria was another addition to the FTSE Frontier 50 Index and was previously added to the MSCI Frontier Markets Index last in MSCI’s August 2019 Quarterly Index Review.
There were two additions for Morocco (Ciements du Morocco and Managem), one for Bangladesh (BATBC) and one for Kazakhstan (National Atomic Company Kazatopmrom). All four of these companies were evaluated to have satisfied the necessary liquidity criteria to be included in the Index.
|Al-Eqbal Co. for Investment||Jordan|
|Hyper S.A. (Label Vie)||Morocco|
|Banque Marocaine pour le Commerce et l’Industrie||Morocco|
|Credit Immobilier et Hotelier||Morocco|
|Bank Dhofar Al-Omani Al-Fransi||Oman|
|Societatea Nationala Nucleareletrica SA||Romania|
|Societatea Nationala De Gaze Naturale ROMGAZ SA||Romania|
|Banca Transilvania SA||Romania|
|BRD-Groupe Societe Generale||Romania|
|Nova Ljubljanska Banka DD Ljubljana (GDR)||Slovenia|
|Societe Frigorifique et Brasserie de Tunis||Tunisia|
In order to achieve balance, 14 companies were removed from the FTSE Frontier 50 Index with Romanian companies been highlighted as the most notable in the departure list. Five stocks – Societatea NAtionala Nuclearelectrica, ROMGAZ, Banca Transilvania, BRD-Group Societe Generale and Petrom – have been removed from the Index after FTSE announced last year that Romania will be promoted from a Frontier Market to a Secondary Emerging Market. Three companies will be represented in the FTSE Global All Cap Index with a projected weight of 0.008%, while also holding a 0.085% weight in the FTSE Emerging Markets Index.
Despite two Moroccan stocks been added, there will be three stocks removed from the FTSE Frontier 50 Index: Hyper, Banque Marocaine pour le Commerce et l’Industrie and Credit Immobilier et Hotelier.
Slovenia’s Nova Ljubljanska Banka was another exit that caught the eye. The bank was added to the FTSE Frontier Markets Index in November 2018 followings its successful initial public offering (IPO).
The remaining removals – Al-Eqbal Co. for Investment (Jordan), Nigeria Breweries (Nigeria), Bank Dhofar Al-Omani Al-Fransi (Oman), Societe Frigorifique et Brasserie de Tunis (Tunisia) and Vincom Retail (Vietnam) – all failed liquidity requirements.
There has been a significant change in the composition of the FTSE Frontier 50 Index as a result of FTSE’s latest announcement. Peru has been included (from zero to six), while Jordan, Romania and Tunisia no longer have representative stocks in the Index.
Morocco and Vietnam still have the most constituents in the Index, despite the former losing one (two added, three deleted) and the latter gaining two (three added, one removed). Both are still expected to have a sizable share in the Index despite Peru’s recent inclusion. Vietnam is still on FTSE’s Watch List for a potential upgrade to Secondary Emerging Market status.
Both Bangladesh and Kazakhstan continue to gain spots in the Index and are two Frontier Markets that investors should keep a close eye on.
An interesting talking point will be where Tanzania fits in the Index. It was recently upgraded from an Unclassified Market to a Frontier Market, but no securities feature in the latest FTSE Frontier 50 Index. It may take a while for the East African nation to become an established member like its regional neighbour Kenya.