Retains Dangote Cement, NB, UBA, Zenith, Access, Others

At last, the reviewed MSCI (Morgan Stanley Capital Index) Frontier Market Index was released with four companies quoted on the Nigerian Stock Exchange (NSE) taken out.
They Are: FBN Holdings, Guinness Nigeria, Forte Oil and PZ Cussons Nigeria, with no replacements in the index which captures large and mid-cap constituents across 29 Frontier Market countries.
In all, according to analysis by Cardinal Stone Research, the outcome of the semi-annual review showed that there were five additions to and nine deletions from the index “with the three largest additions coming from Argentina, Morocco and Bangladesh.”
FBNH, Guinness and PZ were moved to the MSCI Frontier Markets small cap index which captures small cap representations across the frontier markets, bringing total additions to 19.
There were however a total of 17 removals, including Nigeria’s Diamond Bank, Cadbury, FCMB, Glaxosmithkline Consumer, Skye Bank and Sterling Bank.
The largest number of additions came from Bangladesh, six; while it followed Nigeria with three deletions; followed by Vietman with three addition and no deletion; Oman, three addition, one deletion; while Lithuania, Romania, Croatia and Morocco had one addition each. Ivory Coast, with no addition, had two of its stocks removed; Tunia, also had zero addition and one removal; just as Argentina and Sri Lanka each had zero additions and one deletions, like Tunisia. Croatia had an addition and deletion each.
The latest action means Nigeria now has 12 stocks on the Frontier Index. They are: Nigerian Breweries; Guaranty Trust; Zenith Bank; Nestle Nigeria, Dangote Cement, United Bank for Africa, Access Bank, Stanbic IBTC; Seplat Petroleum Development Company; Ecobank Transnational Incorporated; Lafarge Africa and Unilever Nigeria.
On the implications of the latest review, Cardinal Stone Research expects “funds that passively track the index to begin underweighting the deleted securities and subsequently phase them out from their buckets overtime.
“We expect the impact on Forte Oil to be more grave given that it has been completely removed from all MSCI indexes. On the other hand, we expect the impact on the prices of FBNH, GUINNESS and PZ to be milder as the increased demand from Funds that track the small cap index may provide some sort of buffer to the sell-offs from funds that track the main MSCI Frontier market index.
“More so, we think these changes in the Frontier Market Index may also favour the remaining Nigerian securities in the index as they are likely to be reweighted upwards,” it added.
Implementation of the review and subsequently the impact is expected to begin at close of activities on November 30, 2017.