Stock indices are a crucial feature of the global financial landscape, says Sydney Maki on Bloomberg. They are “followed on autopilot by trillions of dollars in passive investments, and used as a benchmark for trillions more in active strategies”. More than $16trn globally is thought to be benchmarked to indexes compiled by MSCI, and inclusion in these is “an important symbol of acceptance in the mainstream global financial community”.
So the news that Russian stocks will be removed from MSCI’s main emerging markets index at a price that is effectively zero., in the firm’s own words, is highly significant: it shows how Russia has been “cut off from large swathes of the investing world”, says Maki. Sanctions, the closure of the Moscow stock exchange and a ban on foreigners selling assets locally mean that the market is essentially uninvestable, says the Financial Times. Other index providers, such as FTSE Russell and S&P Dow Jones, plus investment bank JPMorgan, which produces several key emerging-market bond benchmarks, are also removing Russian assets from their indices.
Unless investors have taken specific bets on Russia they are unlikely to notice big losses from the index writedowns. Russian stocks made up less than 4% of the MSCI Emerging Markets index at the start of the year, a sharp drop from 2008 – when it accounted for 10%. The Universities Superannuation Scheme, Britain’s biggest private pension plan, has just 0.5% or so of its portfolio in Russian-connected assets.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Still, as Hermitage Capital Management’s co-founder Bill Browder says, the sudden dash to sell near-worthless Russian securities is “a reminder that if you do business in countries without a rule of law, you could lose everything”.
-
Equity release rates drop – is it worth unlocking cash from your home?News Lifetime mortgage rates are falling from their record highs - is equity release worth another look?
-
Hargreaves Lansdown launches fixed-term cash ISA product
savings/hargreaves-lansdown-fixed-cash-isa-launch Investment platform Hargreaves Lansdown is to offer fixed term cash ISAs via its Active Savings platform paying 4.8%, tax free - but is it any good?
-
The fallout from the war on landlords
Investors fleeing the market and the rise in rents are affecting us all.
-
Eight small-cap trusts to bet on
Funds investing in market minnows are out of favour, but the cycle will turn. Here are the best bets.
-
Trust in US TIPS to beat inflation
In an inflationary market TIPS, the US Treasury Inflation-Protected Securities are most compelling says Cris Sholto Heaton.
-
What is Vix – the fear index?
What is Vix? We explain how the fear index could guide your investment decisions.
-
Time to invest in the next agricultural revolution
As the global demand for food increases, food producers are seeking to lower their carbon emissions. Technology will help meet both goals.
-
Asia’s hidden gems: Three undervalued Asian stocks
Personal View Fidelity's Nitin Bajaj highlights three favourite Asian stocks.
-
Uber's switch to profitability is an opportunity for investors
The ride-hailing platform has just reported its first operating profit and its future looks bright.
-
The bond bust bodes well for equities
Rising yields on government debt herald the end of the free-money era and good news for investors.
