By Ben Edwards
Index providers are mulling stripping out some Russian
companies, potentially undermining a key structural support for the
country's markets.
In a statement late Thursday, MSCI Inc. said it is considering
removing VTB Bank's ruble shares from its Russian index after the
U.S. Treasury Department slapped the bank with sanctions
restricting its access to U.S. financial markets. MSCI said it was
mulling the move on concerns that if VTB issues new equity, it
could potentially lead to some market participants trading the
shares in the secondary market, breaking those sanctions.
It also said it was launching a new series of composite indexes
that will exclude Russia for investors that want to avoid exposure
to Russian securities.
The sanctions prohibit U.S. investors from providing certain
firms with financing through new equity or new debt that matures in
longer than 90 days. The measures came as Western leaders ramped up
pressure on Russia amid the turmoil in eastern Ukraine.
MSCI said another proposal is to maintain VTB Bank in the MSCI
Russia index until the first issuance of new shares. The index
provider is seeking feedback from market participants and will
announce its decision on Aug. 8.
VTB's Russian peers Rosneft and Novatek GDR, which were also
subject to sanctions, won't be removed from the index, MSCI
said.
MSCI's move follows a similar call from S&P Dow Jones
Indices, which said Thursday it was asking clients whether it
should remove sanctioned firms from its indexes.
S&P is mulling whether sanctioned firms' shares should be
removed from its indexes, or if a specific country adopts sanctions
on a firm if the index provider should treat that firm as
sanctioned in all jurisdictions.
Earlier in July, J.P. Morgan Chase & Co. said the current
composition of its widely followed emerging-market bond index won't
change, but it won't include any new bonds issued by sanctioned
Russian firms.
Write to Ben Edwards at ben.edwards@wsj.com