Leading index compiler Morgan Stanley Capital International (MSCI) announced changes to the MSCI Frontier Markets Index in its February 2021 Index Review, in particular three additions and two deletions from the index.
Kaspi.kz GDR (Kazakhstan)
Kazakhstan’s banking and fintech company Kaspi.kz will be added to the MSCI Frontier Markets Index after a successful initial public offering (IPO) on the London Stock Exchange (LSE) in October 2020, where the stock opened at $38 per share and reached a high of $46.90 in the first day. The stock is currently trading just over $77.5 as of 11th February 2021, just over double the opening price on the first day.
Kaspi.kz was also included in the FTSE International Order Book (IOB) Index in December 2020.
Vietnam Rubber Group (Vietnam)
Vietnam Rubber Group was the second company that MSCI confirmed will be included in the MSCI Frontier Markets Index. The company recently announced its positive financial results for 2020 after its post-tax profits rose by 36.4% compared to 2019.
Vietnam Rubber Group’s share price grew by 156% in 2020.
Jordan Petroleum Refinery (Jordan)
Zarqa-based Jordan Petroleum Refinery, which runs the only oil refinery in Jordan, was the final company to be added to the MSCI Frontier Markets Index in the February 2021 Review after being promoted form the MSCI Frontier Markets Small Cap Index.
Two Lebanese stocks – Solidere A and Solidere B – were removed from the MSCI Frontier Markets Index after the index compiler confirmed the removal of Lebanon’s Frontier Market status. The country will now be classified as a “Standalone Market” after failing to convince MSCI on its market accessibility issues to the imposition of capital controls since October 2019.
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.
Small Cap Index
There was only one deletion from the MSCI Frontier Markets Small Cap Index – Jordan Petroleum Refinery – after the stock was moved into the MSCI Frontier Markets Index.
The only other announcement related to Frontier Markets in the February 2021 Review was the confirmation of Iceland’s eligibility for inclusion in the MSCI Frontier Markets 100 Index and MSCI Frontier Markets 15% Country Capped Index, which is scheduled to take place in the May 2021 Review. Previous consultations have stated that 11 Icelandic constituents will be added to the MSCI Frontier Markets 100 Index and comprise of a combined weight of 9%, making it the fourth largest country allocation in the Index.
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.
Current MSCI Frontier Markets Allocation
As of the end of January 2021, the largest constituent countries in the MSCI Frontier Markets Index are Vietnam (29.61%), Morocco (13.79%), Kenya (8.57%), Romania (8.16%) and Bahrain (7.74%). Each country in the index (barring Bangladesh and Nigeria) have seen an increase in their weight after Kuwait was promoted to the MSCI Emerging Markets Index last year.The largest five companies (out of 79) are Ahli United Bank (Kuwait, 5.95%), Safaricom (Kenya, 5.43%), Vingroup (Vietnam, 5.06%), Vinhomes (Vietnam, 4.72%) and Vietnam Dairy Products (Vietnam, 4.53%).
All changes will be implemented as of the close of Friday 26th February 2021. Previous MSCI reviews for Frontier Markets can be found below: