Strategy Note /
Russia

MSCI May SAIR preview: Changes to POLY, NLMK; OZON inclusion on the cards

  • The MSCI is scheduled to announce the results of its Semi-Annual Index Review (SAIR) on 11 May after the market close

  • OZON on track for inclusion

  • POLY and NLMK to benefit from changes to NoS and FIF

John Walsh
John Walsh

Equity Strategist

Follow
Alfa
8 April 2021
Published byAlfa

The MSCI is scheduled to announce the results of its Semi-Annual Index Review (SAIR) on 11 May after the market close. The changes will take effect on 28 May.

OZON on track for inclusion: OZON remains a contender for inclusion to the MSCI Russia Standard Index at the May rebalancing. As of the close on 7 April, OZON ADRs were trading 4.7% above the inclusion threshold (currently $56.32/ADR) based on a 0.2 FIF (free-float inclusion factor). Assuming the stock is included with a 0.2 FIF, we estimate passive inflows of $107 mn at 3M ADTV of 3.0.

POLY and NLMK to benefit from changes to NoS and FIF: There are several changes expected to the NoS (number of shares) and the FIF. The most noteworthy adjustments are expected to be in Polymetal and NLMK. We anticipate a substantial rise in the free-float inclusion factor for POLY from 0.5 currently to 0.8, as well as a minor increase in the NoS, both of which will raise the stock’s pro-forma weight from 1.9% currently to 3.0%. We estimate this will lead to passive inflows of $118 mn in the name. We expect the FIF of NLMK to be raised from 0.2 currently to 0.25, which we calculate will trigger passive inflows of $37 mn in the name.

No exclusions anticipated: There are no exclusion expected at the May SAIR. VTB which has the lowest weighting (0.8%) at the moment on the MSCI Russia Standard Index currently trades 20% above the threshold for exclusion.

The pricing period for the MSCI’s rebalancing decision will be taken on any of the trading sessions between 19-30 April inclusive. Our assumptions are based on the share prices as of the close on 7 April and are, thus, subject to change considering the high market volatility at the moment.

Assuming the inclusion of OZON and multiple changes to the NoS (number of shares) and the FIF (free-float inclusion factor) of the constituents, we expect the weighting of Russia in the MSCI EM Index to be increased from 2.9% currently to 3.0% pro-forma.