EM Indexes To Remove Russia

MSCI and FTSE Russell will remove Russia securities from their indexes within the next week.

Reviewed by: Jessica Ferringer
Edited by: Jessica Ferringer

In a move that will reverberate through emerging marketETFs, two index giants have decided to pull Russiaequities out of their indexes.

On March 2, MSCI announced that the MSCI Russia indexes will be reclassified from Emerging Markets to Standalone Markets status. This change will be implemented across all MSCI indexes as of market close on March 9.

That same day, FTSE Russell announced that Russia will be deleted from all FTSE Russell Equity indices effective from the market open on March 7. The market will be classified as an "unclassified" market, and will be reevaluated during the annual country classification process.

Both index providers said that index constituents would be priced at zero, with MSCI noting that “the Russian equity market is currently uninvestable.”

MSCI and FTSE Russell are the index providers behind some of the largest emerging marketETFs, such as the Vanguard FTSE Emerging Markets ETF (VWO) and the iShares Core MSCI Emerging Markets ETF (IEMG). This means that the decision to remove these equities from the index will affect billions of dollars in assets.

Though the value of Russiaequities has plunged due to economic sanctions enacted against the country, Russia accounts for 2-3% of these broad-based cap-weighted ETFs.

S&P Dow Jones Indices is also considering what action to take within its indexes that hold Russiasecurities. The firm is expected to announce its plan after the close of business on Friday, March 4.

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Jessica Ferringer, CFA, is a writer and analyst for etf.com. She has 10 years of experience in investment research and due diligence, including helping to manage ETF portfolios. Jessica has a bachelor’s degree in economics from Lafayette College and an MBA from the University of Pittsburgh.