MSCI categorizes the markets it tracks into three main groups - developed, emerging, and frontier – designed to provide investors with a framework to better understand and compare different markets and evaluate the associated investment risks
Investment research firm, Morgan Stanley Capital International (MSCI), has announced the possibility of reclassifying its Egyptian indexes “in the event of further deterioration of market accessibility in Egypt” in its latest report.
In its annual Market Classification Review, MSCI explained that it may consider reclassifying the MSCI Egypt Indexes from emerging to either frontier or standalone status. The report also noted that a shortage of foreign currency is “affecting foreign investors’ ability to repatriate capital in a timely manner.”
Dimitris Melas, Global Head of Index Research and Product Development and Chairman of the MSCI Index Policy Committee, explained that due to the challenging global macroeconomic environment has led to limited foreign exchange liquidity in various markets.
MSCI categorizes the markets it tracks into three main groups - developed, emerging, and frontier – designed to provide investors with a framework to better understand and compare different markets and evaluate the associated investment risks.
Currently, Egypt is considered an emerging market, with Egyptian equities included in the MSCI Emerging Markets Index alongside countries such as Saudi Arabia, Qatar, Turkey, and the UAE.
The MSCI places countries such as Jordan, Morocco, and Tunisia in its frontier category, with standalone markets comprising of newly eligible markets or those that have experienced significant deterioration in market accessibility, such as Lebanon.
In May 2023, the firm introduced a special treatment in the MSCI Egypt Indexes aimed at mitigating index replication concerns and minimizing changes in related indexes.
The report added that the MSCI 2024 Market Classification Review will apply new size cutoffs for Frontier Markets. This review will consider the size and liquidity requirements resulting from the May 2024 Index Review, reflecting MSCI's commitment to periodically reassess and adjust its classification criteria to align with evolving market dynamics.
