We have just announced the results of the annual Country Classification Review for countries monitored by its global equity and fixed income indexes. Our approach to country classification is informed by feedback from a broad set of market participants and provides investors with a framework for evaluating and investing across asset classes in global equities and fixed income markets.
Here is a summary of the main points.
Equities
- Romania, currently a Frontier market, is to be reclassified as a Secondary Emerging market, effective from September 2020.
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Tanzania, currently unclassified, is to be included as a Frontier Market, effective from September 2020.
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Argentina is removed from the Watch List for possible reclassification to Secondary Emerging market status due to the imposition of capital controls.
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Vietnam is retained on the Watch List for possible reclassification from Frontier to Secondary Emerging.
The reclassification follows market improvements implemented by authorities in the respective countries. See more information on the Equity Country Classification framework.
Fixed Income
We introduced the FTSE Russell Fixed Income Country Classification Framework earlier this year to enhance the transparency of the process used to manage benchmark inclusion. It assigns a Market Accessibility Level of 0, 1 or 2, with 2 representing the highest level of accessibility for foreign investors. A minimum of 2 is required for the FTSE World Government Bond Index (WGBI), a widely used metric for global, fixed-rate local currency investment grade government bonds markets that covers 22 markets.
In this announcement, we confirmed:
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Israel was assigned a Market Accessibility Level of 2 as part of the inaugural March 2019 review and continues to meet the minimum market size and credit rating criteria for the WGBI. As a result, Israel local currency government bonds will be added to the index from 1 April 2020 and are projected to comprise 0.29% of the index on a market value weighted basis as of August 2019 based on 13 bonds with $68.2 billion in market value.
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China will remain on the Watch List for potential upgrade to Market Accessibility Level 2 based on feedback from index users that the Chinese government bond market continues to make demonstrable progress towards meeting the criteria for the highest accessibility level.
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Malaysia will be retained on the Watch List for potential downgrade from its current Market Accessibility Level of 2. FTSE Russell will continue to engage with market participants to understand the practical impact of recent initiatives announced by Bank Negara Malaysia to improve market liquidity and accessibility.
FTSE Russell will provide further updates as appropriate after the interim review in March 2020.
More information on the Fixed Income Country Classification framework can be found on our website.
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