S&P Dow Jones Indices announced Wednesday that following the results of its Country Classification Consultation that Morocco has been demoted to the frontier markets classification from emerging markets status.
Morocco was demoted to frontier status because “the lack of liquidity in Moroccan equity markets is a significant issue for market participants” and “the declining trend in market liquidity over the last several years does not align with other emerging markets, making it more appropriate to be classified as a frontier market,” said S&P Dow Jones Indices in a statement. http://us.spindices.com/
Five exchange traded funds currently feature exposure to Morocco, according to ETFdb.com. However, S&P’s decision to demote Morocco to frontier status is not likely to have a major impact on ETFs because the ETFs with largest weights to the North African nation – the Market Vectors Africa Index ETF (NYSEArca: AFK) and the WisdomTree Middle East Dividend Fund (NasdaqGM: GULF) – track in-house indices. Plus, those are regional ETFs, not explicit emerging or frontier funds.
MSCI (NYSE: MSCI) already considers Morocco to be a frontier market as highlighted by the country’s 5.4% weight in the iShares MSCI Frontier 100 ETF (NYSEArca: FM).
S&P Dow Jones Indices is the second index provider since September to announce a demotion of Morocco to the frontier classification.
In September, FTSE Group, the indexing unit of the London Stock Exchange, demoted Morocco to frontier status from the secondary emerging markets classification, saying at the time the demotion was the result of “the continued decline in broad market liquidity below the level sufficient to support sizeable global investment.” [FTSE Demotes Argentina, Morocco]
S&P Dow Jones also said it will continue to classify Egypt as an emerging market. Various index providers have noted the country is a candidate for the frontier demotion, but thus far, only Russell Investments has made an announcement to that effect. [Egypt ETFs in Focus on Russell Demotion]
“No changes are being made to the treatment of Chinese A-shares or Russian securities within S&P Dow Jones Indices global benchmark indices. All of these markets continue to be monitored closely for any future changes,” said the index provider.
Earlier this year, S&P initiated a client survey regarding the possibility of removing Russian stocks from its various international and emerging markets benchmarks. The index provider ultimately decided not to make those changes.
ETF Trends editorial team contributed to this post.
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