Msci Inc. · NYSE:MSCI
Msci — Investor Presentation (October 2004)
26 slides from Msci's investor presentation, October 2004
Slide 1: Framework for Country Reclassification in the MSCI Global Equity Indices
www.msci.com Framework for Country Reclassification in the MSCI Global Equity Indices Consultation Document August - October 2004
Slide 2: About the consultation
www.msci.com About the consultation Introduction The primary objective of this consultation is to solicit feedback on certain enhancements to the process of reclassification of a country from the emerging to the developed market indices, and in particular to understand the investment process needs
Slide 3: I. The Process
www.msci.com I. The Process
Slide 4: Current process for country reclassification
www.msci.com Current process for country reclassification MSCI regularly monitors countries internally, and for those countries that make significant progress, MSCI conducts ongoing more intensive research and analysis. Public communication with regards to a potential country reclassification ha
Slide 5: Potential issues with the current process
www.msci.com Potential issues with the current process A perceived lack of transparency in MSCI’s current reclassification process may result from the following: • The communication and dialogue with investors, in the form of a formal review through a consultation, starts only after MSCI concludes
Slide 6: Proposed enhancements
www.msci.com Proposed enhancements The proposal is to make a clearer distinction between the public formal review and the consultation and to start the formal review at an earlier stage. The formal review would consist of regular contacts with investors, other market participants and expert orga
Slide 7: Proposed enhancements
www.msci.com Proposed enhancements As an example, MSCI announced that the status of Greece was under formal review for a potential reclassification from the emerging to the developed indices on March 28, 2000. A public investor consultation was conducted in parallel. De facto, the formal review co
Slide 8: Proposed enhancements
www.msci.com Proposed enhancements In this framework, there will be three phases: • Phase I: the public formal review • Phase II: the formal consultation, assuming one is warranted and • Phase III: MSCI’s final announcement The length of time of each of these phases may have important implicatio
Slide 9: Proposed enhancements: Timeframe discussion
www.msci.com Proposed enhancements Timeframe discussion Currently, the length of time between the start of a consultation and the final announcement generally is three to six months and a lead time of at least six months is typically provided to investors before the implementation of a change. O
Slide 10: Potential enhancements
www.msci.com Potential enhancements Timeframe discussion If a short timeframe is sufficient, MSCI could wait until the evidence is stronger that a country is a serious candidate for a reclassification before announcing a public formal review. On the other hand, if the investment processes of mar
Slide 11: Potential enhancements
www.msci.com Potential enhancements Timeframe discussion We can distinguish between two main timeframe scenarios: • A reasonably short timeframe, for example 1 to 1 ½ years before the opening of a consultation, if one is warranted • A longer timeframe, for example 2 to 3 years before the opening o
Slide 12: Potential enhancements: A short timeframe
www.msci.com Potential enhancements A short timeframe Pros: • The start of the public formal review would indicate that the country is a very strong candidate for reclassification. Cons: • Implies that the bulk of the research would have been concluded internally before the start of the public f
Slide 13: Potential enhancements: A longer timeframe
www.msci.com Potential enhancements A longer timeframe Pros: • Would allow MSCI to better judge the level of development achieved and the commitment to reforms while a free exchange of views with market participants continues • Would provide an earlier indication of a potential reclassification an
Slide 14: Handling of transition issues
www.msci.com Handling of transition issues The various aspects of the transition of a country from the emerging to the developed market indices should be taken into consideration. The transition of a country can be implemented in various ways. For example, the transition of several countries can
Slide 15: II. Determining factors for country reclassification
www.msci.com II. Determining factors for country reclassification
Slide 16: Relevance of EM/DM segregation
www.msci.com Relevance of EM/DM segregation As stated earlier, the purpose of this section is to expand the description of the factors used by MSCI in the country classification analysis. MSCI has explored various alternatives to the current division of countries between emerging and developed,
Slide 17: General principles for country reclassification
www.msci.com General principles for country reclassification A country currently included in the MSCI EM Index would not be re-classified to the developed market indices unless it demonstrates that its economic development is sustainable, that it has an advanced capital market and that its institu
Slide 18: Re-classification of countries
www.msci.com Re-classification of countries Sustainability of economic development Macro-economic stability • The nature of past and current economic performance and especially its stability is an important consideration. A reasonable historical economic stability is an important indication for fu
Slide 19: Re-classification of countries
www.msci.com Re-classification of countries Sustainability of economic development (Continued) Involvement of the government in the economy • The degree and the nature of the involvement of the government in the management of the country economy is an important consideration. • On one side, the co
Slide 20: Re-classification of countries
www.msci.com Re-classification of countries Sustainability of economic development (Continued) Health of the financial system, of the corporate sector and households • Particular attention is paid to the strength of the country’s financial system which is an essential element of stability. The hea
Slide 21: Re-classification of countries
www.msci.com Re-classification of countries Development and quality of the market structure and legal framework Investability • The degree of openness of a country and ease of access to the capital markets is fundamental • Factors looked at include, but are not limited to – Requirements for inflow
Slide 22: Re-classification of countries
www.msci.com Re-classification of countries Development and quality of the market structure and legal framework (continued) Business Environment • Factors looked at include, but are not limited to: – Adequacy and transparency of the legal and regulatory system – Level of observance and the fair ap
Slide 23: Re-classification of countries
www.msci.com Re-classification of countries Development and quality of the market structure and legal framework Financial Markets Operational Efficiency • The investment conditions and ease of trading in a given market are important pre-requisites for a market to qualify as developed. • Factors lo
Slide 24: Re-classification of countries
www.msci.com Re-classification of countries Level of political risk and other global considerations The existence of political risk has the potential to jeopardize the sustainability of economic development and reforms in a country. It is therefore an important consideration in the assessment of a
Slide 25: Notice and Disclaimer
www.msci.com Notice and Disclaimer This Presentation has been prepared solely for informational purposes. The Presentation is not a recommendation to participate in any particular trading strategy and may not be relied on as such. The user of the information contained in the Presentation assumes the
Slide 26: MSCI Global Client Service
www.msci.com MSCI Global Client Service Americas – Atlanta +1 404 949 4529 – Boston +1 617 856 8716 – Chicago +1 312 706 4999 – Montreal +1 514 847 7506 – New York +1 212 762 5790 cs.america@msci.com – San Francisco +1 415 5762323 – São Paulo +55 11 30486080 – Toronto +1 416 943 8390 Europe – Am