In its February 2021 Quarterly Index Review for its equity indexes, leading index provider Morgan Stanley Capital International (MSCI) announced the conclusion from its consultation on the eligibility of Icelandic equities for its Frontier Markets Indexes.
Following feedback received from market participants who responded to the consultation, Iceland will be eligible for inclusion in the MSCI Frontier Markets 100 and the MSCI Frontier Markets 15% Country Capped Indexes as part of the May 2021 Semi-Annual Index Review.
After the removal of capital controls and other investment barriers that negatively affected the accessibility of the Iceland equity market for international institutional investors, MSCI promoted Iceland from a Standalone Market to a Frontier Market in June 2020. Iceland was previously on the “watch list” for a potential reclassification since 2019.
While MSCI did not indicate the potential weight that Icelandic securities will comprise in these Indexes in the recent announcement, especially now that Kuwait has recently been promoted, a previous consultation noted that the island nation will welcome two companies – food processor Marel and banking group Arion Banki – to the MSCI Frontier Markets Index and make up nearly 5.24% of the index, making it the fourth largest country constituent after Vietnam, Morocco and Nigeria. It also highlighted that Iceland’s weighting will be 9% in the MSCI Frontier Markets 100 Index, but confirmation of this will be released closer to the May 2021 Semi-Annual Index Review.
The MSCI Iceland Investable Market Index, which is designed to measure the performance of the large, mid and small cap segments of the Iceland equity market, currently has 12 constituents (the largest being Marel (39.69%), Ossur (16.43%) and Arion Banki (9.52%)) and a market cap of just under USD $9.5bn.