MSCI deletes FBN Holdings, Forte Oil, Guinness Nigeria and others  from Frontier Indexes

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An American provider of equity, fixed income, hedge fund stock market indexes, and equity portfolio analysis tools with acronym stands as Morgan Stanley Capital International (MSCI), which compiles influential indexes tracked by thousands of fund managers. MSCI’s indexes cover thousands of stocks under various categories and are used as benchmarks to measure the performance of portfolios has announced decision to delete FBN Holdings Plc, Forte Oil, Guinness Nigeria Plc and PZ Cussons Nigeria Plc from the main MSCI Frontier Markets Indexes and added to the MSCI Frontier Markets Small Cap Indexes.

At the same time, Cadbury Nigeria Plc, Diamond Bank Plc, First City Monument Bank, GlaxoSmithKline Nigeria Plc, Skye Bank Plc and Sterling Bank Plc have been deleted from the MSCI Frontier Markets Small Cap Indexes.

Analysts have predicted sell pressure on six shares deleted from the MSCI Frontier Markets Small Cap Indexes in the coming weeks, while the shares that remain in the main MSCI Frontier Markets Indexes might see some buy interest as investors rebalance their holdings.

The managing Director, High Cap Securities Limited, Mr. David Adnori said, “it might lack information on parameters on those shares.

“Generally, when indexes are composed, shares are not expected to remain in the same position. Some of the time, when a share has gone higher, those that are fallen short are removed.

“The deletion does not mean those shares are not performing. It is expected as some shares were deleted, new ones were added which is usual. It might not have negative effect on their share prices though am already seeing sell off in Diamond bank , Forte Oil, among others,” he explained.

The deletion might come as a surprise as MSCI last month announced its decision to retain the MSCI Nigeria Indexes in the MSCI Frontier Markets Indexes.

A statement from MSCI said, it will also no longer apply the special treatment for the MSCI Nigeria Indexes announced on April 29, 2016.

“More specifically, and as part of the upcoming November 2017 Semi-Annual Index Review , MSCI will implement all index review changes, including changes in the Number of Shares (NOS) and Foreign Inclusion Factors (FIF) that have been postponed since April 29, 2016. These changes will be made for securities classified in Nigeria in the MSCI Nigeria Indexes and in indexes which Nigeria is a component of.  These include the MSCI Factor, Thematic, ESG and other relevant derived indexes. MSCI will also resume the regular implementation of corporate events effective immediately.

“Index review changes for the MSCI Nigeria Indexes will be announced together with the November 2017 Semi-Annual Index Review announcement on November 13, 2017.

“As a reminder, the MSCI Nigeria Indexes were added to the review list for potential reclassification to Standalone status in September 2016 due to issues in the foreign exchange market leading to impairment in the ability of institutional investors to repatriate capital.

“On April 21, 2017, the Central Bank of Nigeria (CBN) announced the establishment of the Investors’ and Exporters’ FX Window which aims to improve liquidity in the foreign exchange (FX) market. Market participants have indicated that since the establishment of this Window, funds can be repatriated at close to the official rate. Concerns on the spreads and delays which investors have earlier experienced have also eased.”

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