Russell indexes Said in a press release on Monday it has reclassified the Egyptian equity market category from an emerging market to frontier statues.
Russell indexes the global asset manager and has USD 4.1 trillion in assets benchmarked to its index.
This conclusion by Russell Indexes results from a three-year market risk review process, as prescribed by Russell’s index methodology, in which Egypt did not meet macro- and operational risk criteria for emerging market status, but did meet classification for inclusion in frontier markets.
Russell Index country classifications are announced each year in March and any changes become effective at the conclusion of the annual index reconstitution process in late June.
Mat Lystra, Russell senior index research analyst, said “Egypt’s political risk has risen steadily since the 2011 revolution and, in order to manage the availability of foreign currency reserves in short supply since the Arab Spring, the country has enacted currency controls, creating a major barrier to efficient trading in the market. Having a clear road map to follow and the global resources to carry out extensive, objective evaluation gives us confidence that Egypt has been accurately evaluated against the same risk and efficiency criteria among all countries in our family of global indexes.”
The reclassification would oblige investment funds tracking Russell’s emerging market index to sell their Egyptian equity holding. However, those who track the Frontier index would still be able to invest in the country.