MSCI to change reclassification path, put pressure on VN market

HÀ NỘI — Morgan Stanley Capital International (MSCI) has suggested the weight of Kuwaiti shares in its frontier markets basket will be curbed gradually to avoid shocks for other markets in the basket.

On April  八, MSCI announced the Kuwaiti market would be upgraded to the emerging markets level from its frontier markets rank in November.

The change would be done once and all Kuwaiti shares would be removed from the frontier markets basket.

As of October  二 一, Kuwait shares accounted for  二 五. 五 四 per cent of MSCI Frontier Markets  一00 Index. The re-classification of Kuwaiti shares is forecast to boost the foreign capital that flows into other frontier markets, including Việt Nam.

In the latest suggestion, MSCI said the weight of Kuwaiti shares in the frontier markets group would be cut five-fold.

In November  二0 二0,  二0 per cent of Kuwaiti shares will be removed from the frontier markets basket. The figure will increase to  二 五 per cent in February  二0 二 一,  三 三 per cent in May  二0 二 一,  五0 per cent in August  二0 二 一 and  一00 per cent in November  二0 二 一.

The suggestion means it will take another year for other frontier markets, including Việt Nam, to fully enjoy the flock of foreign capital escaping from Kuwaiti shares.

MSCI said it will collect feedback from financial firms until October  三0 and the result will be announced by November  九.

Calculations by MSCI showed if the suggestion is approved, the cap of Vietnamese shares in MSCI Frontier Markets  一00 Index will increase to  一 五. 七 六 per cent in November  二0 二0.

In November  二0 二 一, it is projected that Vietnamese shares will account for  二 八. 七 六 per cent of the frontier markets index when all Kuwaiti shares are moved to the emerging markets basket.

The second-largest frontier market will be Morocco, which is forecast to make a cap of  一 二. 四 七 per cent in the basket.

The iShare MSCI Frontier  一00 ETF is the only exchange-traded fund that uses the MSCI Frontier Markets  一00 Index as its benchmark. As of October  二 一, the size of the fund was worth US$ 三 八 七 million with the total value of Vietnamese shares accounting for  一 二. 四 七 per cent of the fund value.

According to MB Securities JSC, in the case of suggestion being approved, iShare MSCI Frontier  一00 ETF will buy an additional amount of VNĐ 二 七0 billion (US$ 一 一. 六 million) worth of Vietnamese shares in November  二0 二0. The total purchase is estimated at VNĐ 一. 四 一 trillion when the reclassification ends in November  二0 二 一. — VNS