Alibaba eligible for MSCI stock indexes as Russia gets snubbed

[MOSCOW] MSCI Inc will allow some companies with overseas stock-market listings in its equity indexes, opening the door to China's Alibaba Group Holding Ltd while excluding Russian firms amid economic sanctions.

Companies with listings outside their home country will be eligible for entry into MSCI's global indexes starting in November, the New York-based company said in an e-mailed statement dated Jan 15. Russian shares will remain excluded because of investor concerns, MSCI said, without elaborating.

Alibaba, Baidu Inc and other Chinese technology companies with US listings may be among the biggest winners from the change as investors with an estimated US$9.5 trillion benchmarked to MSCI indexes buy the stocks.

For Russia, the snub is the latest blow to a stock market that's tumbled 45 per cent in dollar terms during the past 12 months amid falling oil prices, a tumbling ruble and sanctions over the conflict in Ukraine.

"MSCI is trying to protect its clients, investors in index funds, from the consequences of sanctions against Russia," Oleg Popov, a money manager at Allianz Investments in Moscow, said by e-mail on Friday.

"The word Russia bears a negative connotation for investors right now." MSCI said it will continue monitoring the situation in Russia and may revisit its decision "in due course."

On July 31, MSCI introduced indexes that exclude Russia for clients seeking to avoid exposure to the country.

During the November 2015 semi-annual index review, foreign- listed companies will become eligible for inclusion in MSCI indexes for Hong Kong, China, Bahrain, Mauritius, Ukraine and Romania. The stocks will also be considered for MSCI's global indexes, such as the MSCI All-Country World Index.

The MSCI Russia gauge slipped 0.5 per cent at 9:11 am in London, while the MSCI China Index slid 1.1 per cent. Alibaba, the Chinese e-commerce company founded by billionaire Jack Ma, has advanced 42 per cent since its September initial public offering, while Baidu, owner of the biggest web search engine in China, has gained 25 per cent during the past 12 months.

BLOOMBERG