A leading indices provider is to downgrade Jordan to a “frontier” equities market from an emerging market in November.
MSCI-Barra said on Wednesday it might do the same with Argentina and Colombia next year unless there were “significant improvements” in capital flow restrictions.
The group, in which Morgan Stanley has a majority share, created the frontier market category last year. It contains 19 countries, including Bulgaria, Croatia, Kazakhstan, Ukraine, Nigeria, Kenya, Vietnam, Sri Lanka and the United Arab Emirates. It also has developed market and emerging market classifications.
MSCI-Barra announced the revamp after six months of consultations with investors. It wanted to assess whether its emerging market indices, which make up 11 per cent of its global index, MSCI ACWI, take account of the diversification and enhanced returns and opportunities in the segment over the past two decades.
Jordan was being downgraded because most constituents of the MSCI Jordan Index did not meet the minimum size and liquidity requirements for emerging market indices, MSCI-Barra said.
It said it would open consultations on proposals on upgrading Israel and South Korea to developed markets status, and Kuwait, Qatar and the United Arab Emirates to emerging markets. It would make a final decision next July after consultations with authorities to assess concerns such as further improvements to currency market accessibility and the lack of full convertibility of the Korean Won.
However, it expects to make a preliminary assessment on the proposed reclassifications in December.
Remy Briand, managing director and global head of index research, said the reclassification process would not be extended
to markets other than equities.
In the cases of Argentina and Colombia, which risked being downgraded to frontier markets, Mr Briand said there was no preset list of criteria to determine whether the countries had made enough progress by December.
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