In its February 2021 Quarterly Index Review for its equity indexes, leading index provider Morgan Stanley Capital International (MSCI) confirmed that Lebanon has officially been removed of its Frontier Market status.
Lebanon, along with Nigeria and Bangladesh, was warned by MSCI on market accessibility issues due to the implementation of capital controls since October 2019 and has caused fund repatriation problems, index replicability issues and large disparities between the official and parallel exchange rates for the Lebanese Pound. MSCI launched a consultation in November 2020 on whether or not Lebanon should retain its Frontier Market status and official confirmed in December 2020 that it will be reclassified from a Frontier Market to a Standalone Market in the February 2021 Quarterly Index Review.
In order to facilitate index replicability, MSCI will delete each Lebanese security from the MSCI Frontier Markets Indexes at a value 80% below its last traded price as of the close of Friday 26th February 2021. The price adjustment for the Lebanese securities will therefore be reflected in the price performance of the MSCI Frontier Markets Index and other related indexes containing these securities on that date. Lebanon’s current weight in the Index is approximately 1% and there are no Lebanese companies in the MSCI Frontier Markets 100 Index.
After being delisted from both the London and Luxembourg International Order Books, the BLOM Bank GDR was removed from both the MSCI Frontier Markets Index and MSCI Lebanon Index at the end of November 2020, leaving the latter Index with two shares: Solidere A (75.56%) and Solidere B (24.44%).
Lebanon’s BLOM Index declined by 16% last year and was the 6th worst performing Frontier Market in 2020.
Lebanon’s downgrade means that only three countries will represent the Middle East in the MSCI Frontier Markets Index: Bahrain, Jordan and Oman. At this present time, only Palestine represents the Middle East as a Standalone Market Index.