PRESS RELEASEMSCI Announces Results of the MSCI 2024
Market Classification Review
NEW YORK – June 20, 2024 – MSCI Inc. (NYSE: MSCI), a leading provider of critical decision
support tools and services for the global investment community, today announced the results of
the MSCI 2024 Market Classification Review.
Select highlights of this year’s review includes MSCI:• Launching a consultation on the potential reclassification of Bulgaria from Standalone to
Frontier Market status• Continuing to monitor the implementation of measures aimed at improving theaccessibility of the Korean equity market for international investors, but also noting thatthe recent short selling ban introduces market accessibility restrictions• Noting recent improvement in the liquidity of the Egyptian foreign exchange market whilewarning on the potential implications of deteriorations reoccurring• Continuing to monitor the market accessibility of the Bangladesh equity market• Highlighting the evolution of clearing and settlement cycles across global markets“In the face of market volatility, regulators in certain markets around the world have proactively
advocated for elevated market accessibility standards. While we are seeing various
developments and measures announced and implemented, it’s crucial that any actions towardenhancing market accessibility align with investor expectations and that no new restrictions
impede any forward momentum,” said Dr. Dimitris Melas, Global Head of Index Research andProduct Development and Chairman of the MSCI Index Policy Committee. “We will continue toevaluate how new and evolving reforms impact global institutional investors’ market
accessibility and assess their effectiveness throughout the next market review cycle.”
More information related to the MSCI 2024 Market Classification Review, including the resultsof the 2024 MSCI Global Market Accessibility Review, can be viewed at www.msci.com/marketclassification.
Consultation on potential reclassification of Bulgaria to Frontier Market status
MSCI announced today the launch of a consultation on a proposal for potential reclassificationof Bulgaria from Standalone Market status to Frontier Market status in one step, coinciding with
the May 2026 Index Review.
As part of MSCI’s August 2016 Index Review, Bulgaria was reclassified from Frontier Market
status to Standalone Market status after a continuous decline in the size and liquidity of the
Bulgarian equity market. At the August 2023 Index Review, MSCI implemented changes to theindex construction and maintenance methodology for the MSCI Frontier Markets Indexes.
These changes resulted in Bulgaria now having enough companies meeting Size and Liquidity
requirements for Frontier Markets.

MSCI welcomes feedback from market participants on this reclassification proposal until April
15, 2025 and will announce its decision as part of the MSCI 2025 Market Classification Review.
Korea’s Market Accessibility
From 2008 to 2014, MSCI consulted with global market participants on the potential
reclassification of Korea from Emerging Market status to Developed Market status. During thisperiod and the time that followed, market participants highlighted key accessibility concerns
including the limited convertibility of the Korean Won in the offshore currency market; therigidity of the ID system that makes in-kind transfers and off-exchange transactions onerous;
and the lack of investment instruments availability due to the restrictions on the use of
exchange data for the creation of financial products.
MSCI recognizes and welcomes the recently proposed measures aimed at improving theaccessibility of the Korean equity market.
•

Foreign exchange market: In February 2023, improvements to the Korean foreignexchange (FX) market’s structure were announced by the Ministry of Economy and
Finance (MOEF). Starting from January 2024, Registered Foreign Institutions (RFIs) are
now able to participate in the onshore interbank FX market and engage in direct FXtransactions with banks. The pilot operation to extend trading hours has also been
initiated, with full implementation set for the latter half of this year. Additional time isrequired to assess the implementation of these measures and the extent to which theseinfrastructure improvements align the Korean FX market with global standards.

•

Legal Entity Identifiers: Advancements to the capital market were announced by the
Financial Services Commission (FSC) in January 2023. By the end of that year, following
appropriate regulatory modifications and the development of relevant IT infrastructure,corporations began using Legal Entity Identifiers (LEI) instead of the Investor
Registration Certificate (IRC) system. The requirements for reporting investment detailsof each final investor associated with an omnibus account holder were relaxed, and thescope of OTC transactions for ex-post reporting was broadened. However, market
participants have expressed concerns about the complexity of the requirements needed
to obtain an entirely validated LEI, which is creating further obstacles rather thansimplifying market access for foreign investors. MSCI will continue to closely monitor
the implementation of these reforms.

•

Mandatory disclosures: As part of the improvement measures announced by the FSC,
the first phase of the mandatory English disclosures (phased in by asset size and foreign
ownership percentage) started this year. In addition, updates to dividend distribution
procedures, announced by FSC and MOEF last year, were implemented in 2024.
Nonetheless, only a minority of companies have embraced these measures.

It is important to note that the aforementioned reforms do not address the issues arising fromthe limitations imposed by the local stock exchange on the use of exchange data for financial
product creation. Additionally, in November 2023, authorities enacted a full ban on short selling,
introducing additional accessibility constraints.

In response to COVID-19, Korea implemented a ban on short selling on March 16, 2020. By May
2021, this prohibition was temporarily revoked for securities listed in the KOSPI 200 and KOSDAQ
150 Indexes. However, in November 2023, a full ban on short selling was reimposed. While this ban
is expected to be temporary, sudden changes in market rules are not desirable.

As a reminder, potential reclassifications require that all issues have been addressed, reforms
have been fully implemented, and market participants have had ample time to thoroughly
evaluate the effectiveness of the changes.
Improvement in the liquidity of the Egyptian Foreign Exchange Markets
Due to low FX liquidity and the re-emergence of the FX queue, foreign investors encounteredrepatriation challenges in the Egyptian equity market in 2023. In May 2023, MSCI applied a
special treatment for Egypt in the MSCI equity indexes. This special treatment deferred index
review changes and the implementation of corporate events aiming to address index replication
concerns by potentially reducing the number of changes in related indexes. MSCI also
highlighted the deterioration of Egypt’s market accessibility as part of the 2023 Market
Classification Review and warned that a consultation on a reclassification proposal may belaunched if the market’s accessibility worsened further. In March 2024, the Central Bank of
Egypt enhanced currency availability by allowing the Egyptian pound to depreciate andcommitting to shift to a more flexible exchange rate system. With the clearing of the FX
backlog, which had been outstanding for international institutional investors since early 2023,
repatriation challenges were eased. Given this material improvement in the market’s
accessibility, MSCI removed the special treatment for Egypt effective June 3, 2024.
“Significant frictions in the capital repatriation process negatively impacting index replicability
are considered an uncharacteristic feature within Emerging Markets,” remarked Jean-Maurice
Ladure, Global Head of Index Management Research and member of the MSCI Index Policy
Committee. “If Egypt were to re-encounter similar FX liquidity constraints in the near future,
MSCI could consider launching an off-cycle consultation on a reclassification proposal for Egypt
from Emerging Market status to Frontier or Standalone Market status.”
MSCI welcomes the aforementioned positive developments and will continue to closely monitor
the onshore USD liquidity levels and the capacity of foreign investors to repatriate their capital
without delays from the Egyptian market.
Market Accessibility issues in Bangladesh
In July 2022, the Bangladesh Securities and Exchange Commission (BSEC) reinstituted floor
prices for all listed securities. Since then, the BSEC has gradually lifted these restrictions, yet six
listed securities still retain floor prices. In addition, market participants have recently reported
delays in capital repatriation due to low liquidity in the onshore FX market.
As a result of these market accessibility issues, MSCI will continue to apply the special
treatment introduced in February 2023. This special treatment defers index review changes andthe implementation of corporate events aiming to reduce the number of potential changes in
the MSCI Bangladesh Indexes and mitigate concerns on index replicability.

MSCI continues to welcome feedback on the accessibility of the Bangladesh market and may
consult with market participants in case of further developments.
Evolution in Settlement Cycles of Global Equities
The path towards shorter cycles in equity clearing and settlement mechanisms has continued.
In May 2024, USA, Canada, Mexico, Argentina, and Jamaica transitioned from T+2 settlement
cycles to T+1, while other markets, including the European Union, the United Kingdom,
Switzerland, and Australia, are evaluating the possibility of reducing their settlement cycles to
T+1 and are in a consultation/review phase.
In response to these developments, MSCI sought feedback from global market participantsfrom December 21, 2023 to March 15, 2024 on the potential impact of these changes in theirinvestment processes. Market participants agreed that while operational adjustments arenecessary due to these changes, amendments from index providers are not required.
Furthermore, there is an expectation among market participants that the trend towards shorter
settlement cycles will continue, ultimately establishing T+1 as the new standard. Feedback
received also reemphasized that shorter settlement cycles must not introduce further
operational challenges and risk, such as pre-funding requirements. Simultaneously, it wasunderscored that a lack of alignment in equity settlement cycles across global markets isundesirable.
MSCI continues to closely monitor these developments.
-Ends-

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