MSCI Inc. (MSCI) will allow some companies with overseas stock-market listings in its equity indexes, opening the door to China's Alibaba Group Holding Ltd. (BABA) while excluding Russian firms amid economic sanctions.
Companies with listings outside their home country will be eligible for entry into MSCI's global indexes starting in November, the New York-based company said in an e-mailed statement dated Jan. 15. Russian shares will remain excluded because of investor concerns, MSCI said, without elaborating.
(More: Didn't get in on the Alibaba IPO? These ETFs did)
Alibaba, Baidu Inc. (BIDU) and other Chinese technology companies with U.S. listings may be among the biggest winners from the change as investors with an estimated $9.5 trillion benchmarked to MSCI indexes buy the stocks. For Russia, the snub is the latest blow to a stock market that's tumbled 45% in dollar terms during the past 12 months amid falling oil prices, a tumbling ruble and sanctions over the conflict in Ukraine.
“MSCI is trying to protect its clients, investors in index funds, from the consequences of sanctions against Russia,” Oleg Popov, a money manager at Allianz Investments in Moscow, said by e-mail. “The word Russia bears a negative connotation for investors right now.”
MSCI said it will continue monitoring the situation in Russia and may revisit its decision “in due course.” On July 31, MSCI introduced indexes that exclude Russia for clients seeking to avoid exposure to the country.
ALIBABA, BAIDU
During the November 2015 semi-annual index review, foreign-listed companies will become eligible for inclusion in MSCI indexes for Hong Kong, China, Bahrain, Mauritius, Ukraine and Romania. The stocks will also be considered for MSCI's global indexes, such as the MSCI All-Country World Index.
(More: China, and the world's hottest stock exchange, beckons for American investors)
The MSCI Russia gauge added 1.4% Friday morning in New York, while the MSCI China Index slid 1.1%.
Alibaba, the Chinese e-commerce company founded by billionaire Jack Ma, advanced 1% to $97.25, pushing the gain to 43% since its September initial public offering. Baidu, owner of the biggest web search engine in China, jumped 2.1% to $220.58, extending its 12-month rally to 28%.
