Business Maverick: Russia’s ‘Uninvestable’ Stocks Cut by MSCI, FTSE Russell Indexes

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MSCI Inc. and FTSE Russell are cutting Russian equities from widely-tracked indexes, isolating the stocks from a large segment of the investment-fund industry.

An overwhelming majority of market participants see the Russian market as “uninvestable” and its securities will be removed from emerging markets indexes effective March 9, MSCI said. FTSE Russell will delete Russia index constituents listed on the Moscow Exchange on March 7.

“We can’t sell our Russian stocks,” said Russel Chesler, head of investments and capital markets at fund manager VanEck Associates Corp. in Sydney. “Even last week our brokers wouldn’t sell them when the markets were open, and this will just deteriorate things further for investors.” Bloomberg is also seeking feedback on the investability of Russian index members in global equity gauges following recent sanctions and seeks feedback by March 3. Bloomberg LP, the parent of Bloomberg News, is also the parent company of Bloomberg Index Services Ltd., which administers these indexesand ban foreigners from selling securities locally, effectively shutting the exit for investors.

India and China could be beneficiaries, according to Vishnu Varathan, head of economics and strategy Mizuho Bank Ltd. in Singapore. Alan Richardson, a portfolio manager at Samsung Asset Management, said capital flows may pivot to Indonesia and Malaysia, which share similarities to Russia in terms of commodities.

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