Ukraine has been classified as a stand-alone market by S&P Dow Jones Indices due to concerns over liquidity in the market.
The country will be reclassified in the March reconstitution from its current status as a frontier market.
A statement by S&P DJI explained the decision was due to the difficulty investors now face in the current market environment.
“A general lack of liquidity has also caused Ukraine to fail to meet S&P DJI's initial eligibility requirements for frontier markets by having domestic stock market turnover less than $1 billion and an exchange development ratio of less than 5%,” the statement said.
However, S&P DJI said the change in classification will not affect eligibility of non-locally listed Ukrainian stocks in certain indexes, such as the S&P Extended Frontier 150 index and the S&P Select Frontier index.
The provider added that, despite “encouraging steps” taken to improve market accessibility, Chinese A-shares will continue to be excluded from all standard global benchmark indexes. “The consensus is to take a wait-and-see approach as significant uncertainty remains around what the eventual landscape will be for foreign investors,” the statement said.
Other market classifications remained unchanged. Saudi Arabia, Palestine and Zimbabwe will continue to be classified as stand-alone markets.
While progress has been made to liberalize Saudi Arabia's markets, and to improve accessibility to foreign investors, concerns remain in the investment community regarding the qualified foreign financial institution program — launched in June to allow limited access for foreign investors to the domestic stock market — as it is “extremely new and few institutions have been approved at this time,” the statement said.
The market's equity settlement cycle of T+0, was also an issue, as it is different to most other markets and adds operational risk for money managers, required to execute and settle on the same day. S&P DJI said the moves so far are “extremely positive,” but further advancement is needed before action is taken in the index provider's benchmark indexes.
Lack of liquidity was highlighted as the reason classifications stayed the same for Palestine and Zimbabwe.
Greece and Russia will also continue to be classified as emerging markets.