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INDEX WATCH

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INDEX WATCH

MSCI CEEMEA; a look in November

The MSCI is to announce the results of its August Quarterly Index Review on 11 August (effective after the close of trading on 31 August). The methodology the agency uses prevents it from making changes to the indices in August or February, unless any significant events (such as large placements) prompt them. As we have not seen any such events in our CEEMEA universe, we believe the Review is likely to be uneventful and so turn our attention to the November Semi-Annual Review to work out the list of stocks to watch (especially given that the recent rouble weakness changes the layout there).

MFON excluded unless price recovers. At its current price of USD 9.88/GDR, MFON needs to add 7% in order to remain in the MXRU during the November Review. The MSCI is to use the closing prices of one of the last ten trading days of October in order to determine the cutoffs. Here and below, the required price moves for the discussed securities assume other stock and FX prices being unchanged, which means that the question “in which currency is the move required?” is meaningless.

IRAO rallies closer to inclusion levels. IRAO has added 137% YTD. In order to get included into the MXRU this year (as part of the November Review), it would need to add another 42% by the second half of October. There is still a way to go, but nevertheless only a fraction of the performance already achieved this year.

MONET is a candidate to replace TELEC in November. TELEC only has a spot in the MXCZ due to the Index Continuity rule that suggests a minimum of three members in an EM country index. The rule says that if a non-index stock (MONET) has a FIF-adjusted market cap above 1.5x the current constituent (TELEC), the former might be included into the index and the latter excluded. With MONET quite likely to be granted a FIF of 0.60 the ratio currently stands at 1.56x. The change did not happen during the May Review as the MONET placement came too late. We do not believe it could happen in August, as MONET is not currently in the Czech Investable Equity Universe and the MSCI only updates it in May and November.

Multiple changes possible in UAE and Qatar.We see three stocks to watch during the November Review in the UAE universe. DFM might be excluded, while DUBAIPAR might replace ARTC. However, all these are currently borderline. In order for DFM to remain in the index, its price has to increase just 7%. In order for the DUBAIPAR-ARTC switch not to happen, the former needs to go down just 3%. As for MXQA, we see a risk of BRES being excluded if it drops another 7%.

Turkey and Poland.ASELS might be included into the MXTR if its price increases another 5%. As for the MXPL, ENG might be excluded at current prices. The case for the stock remaining in the index does not only rely on its price, but also on the prices of two other stocks: ENA and BDX. If they remain unchanged, ENG is likely to be excluded. If, for example, ENA grows 3% and BDX grows 8%, ENG will remain in the index.

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Energy stocks drag down FTSE 100, IG Group slides

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Energy stocks drag down FTSE 100, IG Group slides 1

By Shivani Kumaresan

(Reuters) – London’s FTSE 100 slipped on Thursday, weighed down by falls in energy stocks as oil prices slid after a surprise increase in U.S. crude inventories, while IG Group tumbled on plans to buy U.S. trading platform tastytrade for $1 billion.

The blue-chip FTSE 100 index lost 0.4%, while the domestically focussed mid-cap FTSE 250 index also slid 0.4%.

Energy majors BP and Royal Dutch Shell fell 3.2% and 2.5%, respectively, and were the biggest drags on the FTSE-100 index. [O/R]

“What is holding back the UK is a lack of tech stocks to capture the ‘rotation’ back into tech seen since Netflix results,” said Chris Beauchamp, chief market analyst at IG.

“Stock markets overall are much quieter today, looking so far in vain for a new catalyst for further upside.”

The FTSE 100 shed 14.3% in value last year, its worst performance since a 31% plunge in 2008 and underperforming its European peers by a wide margin, as pandemic-driven lockdowns battered the economy and led to mass layoffs.

British Prime Minister Boris Johnson said it was too early to say when the national coronavirus lockdown in England would end, as daily deaths from COVID-19 reach new highs and hospitals become increasingly stretched.

IG Group tumbled 8.5% after announcing plans to buy tastytrade, venturing into North America after a stellar year for the new breed of retail investment brokerages.

Ibstock jumped 7.3% to the top of the FTSE 250 after the company said fourth-quarter activity benefited from better-than-expected demand for new houses and repairs.

Pets at Home Group Plc rose 2.2% after reporting an 18% jump in third-quarter revenue, boosted by higher demand for its accessories and veterinary services as more people adopted pets during lockdowns.

(Reporting by Shivani Kumaresan in Bengaluru; editing by Uttaresh.V and Mark Potter)

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Wall Street bounce, upbeat earnings lift European stocks

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Wall Street bounce, upbeat earnings lift European stocks 2

By Amal S and Sruthi Shankar

(Reuters) – European stocks rose on Wednesday after Dutch chip equipment maker ASML and Swiss luxury group Richemont gave encouraging earnings updates, while investors hoped for a large U.S. stimulus plan as Joe Biden was sworn in as president.

The pan-European STOXX 600 index closed 0.7% higher, getting an extra boost as Wall Street marked record highs.

All eyes were on Biden’s inauguration as the 46th U.S. President, with traders betting on a bigger pandemic relief plan and higher infrastructure spending under the new administration to boost the pandemic-stricken economy.

Tech stocks rallied to a two-decade peak in Europe after ASML Holding NV rose 3.0% to all-time highs on better-than-expected quarterly sales and a strong order intake for 2021.

Meanwhile, Richemont rose 2.8%, after posting a 5% increase in quarterly sales as Chinese splashed out on Cartier, its flagship jewellery brand.

Britain’s Burberry jumped 3.9% after it stuck to its full-year goals, saying higher full-price sales would boost annual margins, while Asian demand remained strong.

The pair boosted European luxury goods makers that are heavily reliant on China, with LVMH and Kering gaining between 1% and 3%.

“Any sign that retail spending is picking up in China is going to be a boost to the Western markets and those heavily exposed to it,” said Connor Campbell, financial analyst at SpreadEx.

The European Central Bank is set to meet on Thursday. While no policy changes are expected, the bank could face more questions about an increasingly challenging outlook only a month after it unleashed fresh stimulus to bolster the euro zone economy.

“With the new round of easing measures fully in place and no new forecasts to be presented tomorrow, it should be a fairly uneventful day for the euro,” ING analysts said in a note.

Italy’s FTSE MIB gained 0.9% and lenders rose 1.6% after Prime Minister Giuseppe Conte won a confidence vote in the upper house Senate and averted a government collapse.

Conte narrowly secured the vote on Tuesday, allowing him to remain in office after a junior partner quit his coalition last week in the midst of the COVID-19 pandemic.

Daimler AG jumped 4.2% after its Mercedes-Benz brand unveiled a new electric compact SUV, the EQA, as part of plans to take on rival Tesla Inc.

Germany’s Hugo Boss added 4.4% after Mike Ashley-led Frasers said it boosted its stake in the company.

(Reporting by Sruthi Shankar and Amal S in Bengaluru; Editing by Shailesh Kuber and Arun Koyyur and Kirsten Donovan)

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Miners lead FTSE 100 higher on earnings cheer

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Miners lead FTSE 100 higher on earnings cheer 3

By Shivani Kumaresan

(Reuters) – UK’s FTSE 100 rose on Wednesday as miners gained after a strong production forecast from BHP Group, while encouraging updates from luxury brand Burberry and education group Pearson drove optimism about the earnings season.

BHP Group Ltd climbed 2.8% after it forecast record iron ore production for fiscal 2021, helped by high prices for the commodity. Other miners Rio Tinto, Anglo American and Glencore rose more than 2%.

Global markets rallied in anticipation of more fiscal spending as Joe Biden prepared to take charge as the 46th U.S. president.

“There is a view in the markets that more spending is in the pipeline, after all, Mr Biden will want to start his presidency on a positive note,” said David Madden, market analyst at CMC Markets UK.

The FTSE 100 index rose 0.4% and the domestically focussed FTSE 250 index added 1.4%.

The FTSE 100 has recorded consistent monthly gains since November after the sealing of a Brexit trade deal and hopes of a vaccine-led economic recovery, but has recently lost steam as tighter business restrictions sparked fears of a slow rebound.

Burberry rose 3.9% as it stuck to its full-year goals and said higher full-price sales would boost annual margins and Asian demand remained strong.

Global education group Pearson jumped 8.6% after its global online sales grew 18% in 2020, helped by strong enrolments in virtual schools.

WH Smith Plc surged 10.4% to the top of the FTSE 250 index as its trading during Christmas was ahead of its expectations.

(Reporting by Shivani Kumaresan in Bengaluru; editing by Uttaresh.V, William Maclean)

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