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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.