Russell Indexes re-classifies Egypt as frontier market
The change is part of Russell’s 2014 index review to “capture and reflect global equity market shifts”
Russell Indexes, which has $4.1 trillion tracking its market indices, said on Tuesday it would relegate Egyptian equities from emerging markets status to the smaller frontier markets category.
The reclassification would oblige funds committed to tracking the emerging markets index to sell their Egyptian equity holdings, although those benchmarked to the frontier index would still be able to invest in the country.
The change is part of Russell's 2014 index review to "capture and reflect global equity market shifts", the company said in a statement.
Egyptian stocks have risen 17 percent this year after gains of over 20 percent in 2013 and in dollar terms they have risen 9 percent. But investors have complained in the past about foreign currency shortages when trying to repatriate funds.
"Egypt's political risk has risen steadily since the 2011 revolution and, in order to manage the availability of foreign currency reserves in short supply since the Arab Spring, the country has enacted currency controls, creating a major barrier to efficient trading in the market," Russell's senior index research analyst Mat Lystra said.
Rival index provider MSCI, whose emerging markets indices alone are tracked by more than $1 trillion, said last year it might launch a public consultation with the investment community on Egypt's potential exclusion from its emerging markets index because of the currency problems.
The country has endured three years of political and financial turmoil since the Arab Spring revolts that unseated several rulers across North Africa.
Russell said the index change would come into effect at close of trade on June 27.