Index provider FTSE Russell has released the results of its annual country classification review monitored by its global equity and fixed income indexes, adding Nigeria, Pakistan and Egypt to watchlists.
Under fixed income, South Korea will remain on the "watchlist" for a potential upgrade to Market Accessibility Level 2 and will also be considered for inclusion in the FTSE World Government Bond index, said a Sept. 28 news release.
This decision came on the heels of recent announcements made by the South Korean market authorities of various proposed initiatives designed to improve the market's structure and the accessibility of South Korean capital markets, the release said.
FTSE Russell noted in the release that it will continue to gather feedback from market participants as the proposed reforms in South Korea are implemented in order to leverage the experience of international investors in connection with the requirements for a Market Accessibility Level upgrade.
Also under fixed income, India will be retained on the watchlist for a potential upgrade to Market Accessibility Level 1 and also for consideration for inclusion in the FTSE Emerging Markets Government Bond Index.
FTSE Russell said it is engaging with its index users and Indian market authorities concerning ongoing market structure reforms on the subcontinent.
Finally, Switzerland will remain on the watchlist for a potential upgrade to Market Accessibility Level 2 and for consideration for inclusion in the FTSE World Government Bond Index.
Under equity, Nigeria was added to the watchlist in September 2022, due to international investors reporting they had been unable to repatriate capital from the market since December 2020. Although FTSE Russell held a number of meetings with Nigerian market authorities to discuss the issue, by the end of August 2023, there was "no material improvement in the ability of international institutional investors to repatriate capital from Nigeria," the release noted. As a result, Nigeria was reclassified from Frontier to Unclassified market status.
Under equity, Vietnam remains on the watchlist for a possible reclassification to Secondary Emerging market status as the market has yet to meet the settlement requirements of the FTSE Equity Country Classification Framework. The Vietnamese market continues to pursue various regulatory reforms and an upgrade to the main trading platform, which FTSE Russell continues to monitor.
Also under equity, Egypt will be added to the watchlist for potential demotion from Secondary Emerging to Unclassified market status. Index users and market participants in Egypt have reported ongoing delays in their ability to repatriate capital from the nation's markets since March 2023. FTSE Russell has expressed these concerns to Egyptian market authorities and will continue the engagement process to determine the expected duration of the delays and the issues faced by international investors when attempting to repatriate capital.
Under equity, Pakistan will be added to the watchlist for potential demotion from Secondary Emerging to Frontier market status. FTSE Russell explained that for the last few years Pakistan has witnessed a steady decline in its index weight within FTSE Russell global benchmarks, which has now resulted in the market failing to meet the minimum investable market capitalization exit level threshold required to retain a Secondary Emerging market status.
Pakistan will be assessed against the minimum investable market capitalization exit level threshold based on data as of Dec. 29, 2023.
FTSE Russell added that its next update will be published in March 2024.
FTSE Russell is a wholly owned subsidiary of the London Stock Exchange Group.
