In today’s briefing:
- Russia: Index Deletion & Impacts
- FTSE EPRA Nareit Index Rebalance: Four Inclusions for Asia; Some High Impact Names
- MSCI Announces It Will Exclude Russia from MSCI EM Indices
- Russia Gets the Boot from Major Indices – Minimal Impact But World’s Largest Small Sidepocket?
- TSMC (TSM/2330 TT): Position for ADR Premium Expansion
Russia: Index Deletion & Impacts
- MSCI will move Russia to Standalone market status at the close on 9 March while FTSE will delete Russian securities from its indices at the close on 4 March.
- There will be zero inflows to other markets in conjunction with Russia’s reclassification/ deletion since the fund managers cannot sell the Russian stock to raise cash.
- Some delta one desks/ swap providers could make money on the deletion, while there are trades linked to the deletion from the indices.
FTSE EPRA Nareit Index Rebalance: Four Inclusions for Asia; Some High Impact Names
- There will be four inclusions for Developed Asia in the FTSE EPRA Nareit – One REIT, Takara Leben Real Estate Investment, Vital Healthcare Property Trust and ESR Kendall Square REIT.
- There will be around US$77m to buy from passive funds across all inclusions. The largest impacts will be on Vital Healthcare Property Trust (VHP) and ESR Kendall Square REIT (365550).
- The Japan inclusions are a result of the companies publishing reports in English with an independent auditor signing off on them.
MSCI Announces It Will Exclude Russia from MSCI EM Indices
- MSCI announced this morning (3 March) that it will exclude Russia from MSCI EM indices as of 9 March.
- As a result of this decision, this will further devastate the Russian stock market but it should benefit other MSCI EM included countries including China, Korea, Taiwan, India, and Brazil.
- Some of the Korean stocks which could benefit from the greater passive index capital flowing in include Samsung Electronics Pref, LG Chem Pref, and Hyundai Motor Pref.
Russia Gets the Boot from Major Indices – Minimal Impact But World’s Largest Small Sidepocket?
- Major global indices have decided to relegate Russia to the “standalone” and “unclassified” market status due to sanctions and restrictions on transfer/payment/clearing.
- Talk of significant flows into major non-Russia EM markets such as China, Taiwan, Korea, etc is misguided.
- Russia was a non-negligible weight in global EM a few months ago, but GDRs have fallen dramatically and Russia-listed are effectively now portfolio pocket lint.
TSMC (TSM/2330 TT): Position for ADR Premium Expansion
- The premium of Taiwan Semiconductor Sp Adr (TSM US) to TSMC (2330 TT) has dropped from 10% to nearly parity in slightly less than a month.
- There is still no headroom available on the ADR and we expect the premium to move higher once the selling on the ADR is complete.
- The SGX has recently launched single stock futures on Taiwan Semiconductor Sp Adr (TSM US). There could be market makers willing to provide liquidity which would make trade entry easier.
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