MIKE METELITS, Johannesburg | Monday 6.30pm.
Morgan Stanley Capital International (MSCI) plans to drop Malaysia from its Emerging Markets Free Index on November 30. The move will increase the weighting of other emerging markets in the index’s calculations. South Africa has the second largest weighting in the index at 11,8%, and this will increase to 12,2% when Malaysia is excised.
The index is used for benchmarking performance of emerging markets and asset allocation for those funds still investing in the troubled sector. Increased weighting for South Africa will mean an increase in funds flowing to our economy. Roughly US$100-billion still goes to emerging markets in investment, and the new weighting would lead to an additional US$400-million (2,3-billion rand) for South Africa.
MSCI Indices are the standard for information on emerging markets and asset allocation, and have been since inception in 1968. They were the first to begin covering this field.
Malaysia will be excluded from the Index as a result of re-imposing capital controls in September, and limiting foreign investment by prescribing a one-year “holding period” on foreign funds. Presumably, along with criticism from the world’s major financial institutions, exclusion from the index and its attendant capital flows is meant to punish Malaysia and warn other countries not to follow suit.