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Reclassifications to shift frontier index
21 May 2014
MSCI Frontier Markets Index to increase exposure to other froNtier markets including Africa as a result of the upgrading of Qatar and UAE, according to Baring
The MSCI Frontier Markets Index will have a higher exposure to
Africa, Asia and Latin America as a result of the forthcoming
reclassification of Qatar and the United Arab Emirates (UAE),
according to Baring Asset Management.
MSCI will upgrade the two markets from frontier to emerging
market status on June 2.
Reallocating the current 36.3% weighting that UAE and Qatar
share in the index, will also proportionately increase its
exposure to other markets in the Middle East such as Kuwait and
"Africa is one of the regions where we see strong long-term
investment potential," said Michael Levy, investment manager
for the Emea and frontier markets equities team at Baring. "One
consequence of this change is that we expect to see increased
attention directed at markets in the region."
The MSCI Emerging Markets Index is unlikely to undergo
immediate major change as a result of the reclassifications.
The weighting for Qatar and the UAE combined will probably
stand at just over 1% when they enter the index, according to
"At the margin, however, we may start to see more institutional
investors entering [Qatar’s and the
UAE’s] markets as a consequence of the change,
which should be positive for the longer-term development of the
region," added Levy.
The upgrades will help to reduce the overlap between frontier
markets and the Mena region. Over time, both classifications
will play a role in delivering long-term growth for portfolios
as a result of their positive demographics and urbanisation,
the increased discretionary spending that accompanies this, and
rich endowments of natural resources, according to
These factors will "provide investment opportunities for
companies as well as helping to finance the investment in
infrastructure needed to support economic and population
growth," said Levy.
Read more about the impact of the MSCI upgrade on the wider
Mena region here: http://bit.ly/1o2ejlt