Consultation on a Market
Reclassification Proposal for theMSCI Lebanon Index
November 2020

© 2020 MSCI Inc. All rights reserved.
Please refer to the disclaimer at the end of this document.

Background• The Lebanese equity market continues to exhibit severe accessibility

issues caused by capital controls introduced in October 2019.
‒ These have resulted in fund repatriation and index replicability
issues for international institutional investors, as well as asignificant gap between the parallel and official exchange rates for
the Lebanese Pound.
‒ Recent developments in Lebanon make the timeline for a potential
relaxation of such measures unclear.
• Market participants have continuously expressed concerns related tothe investability and replicability of the MSCI Lebanon Indexes andrelated composite indexes, such as the MSCI Frontier Markets Index.
• Consequently, MSCI is launching a consultation to reclassify the MSCILebanon Indexes from Frontier Market to Standalone Market status in
one step coinciding with the February 2021 Quarterly Index Review(QIR).
• MSCI welcomes feedback from market participants on thereclassification proposal until December 4, 2020. The results of theconsultation will be announced by December 31, 2020.
Click to add footnotes or disclosures.

2Lebanon – timeline of events
October 2019

• Banks introduce capital
controls in the form of
foreign currency
withdrawal restrictions
and cross-bordertransfer limits• International
institutional investors
become unable torepatriate cash
proceeds from equity
investments trading at
the Beirut Stock
Exchange

June 2020

November 2020

• MSCI applies• Capital controls remain

specialtreatment forsecurities
classified in
Lebanonin place• Parallel rate for theLebanese Poundcontinues to tradesignificantly weaker
than the official peg

3Composition of the MSCI Lebanon Index
MSCI Lebanon Index
Index Market
Capitalization

USD 2,218 million

Count of securities

3 (1 GDR)

Weight in FM

Security Name

2.11%

GICS Sub Industry
Real Estate
Development
Real Estate
Development

Solidere A
Solidere B
Blom Bank Gdr

Diversified Banks• All 3 constituents of the MSCI Lebanon Index
trade in USD.

• BLOM BANK GDR trades in London, and is not
impacted by bank restrictions.1Index Market
Capitalization(USD million)

Weights in the
MSCI FM Index

Weights in theMSCI Lebanon
Index

1,496

1.42%

67.45%

484

0.46%

21.83%

238

0.23%

10.71%

Primary Exchange
Beirut StockExchange
Beirut Stock
Exchange
London Stock
Exchange

Data as of September 30, 2020.

1 As announced on November 9, 2020, MSCI intends to delete BLOM BANK GDR from the MSCI Global Standard Indexes

effective November 24, 2020, following its voluntary delisting from the London Stock Exchange.

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Discussion points• Given the current level of restrictions imposed by banks, is it

appropriate to reclassify Lebanon to Standalone Market status?

• Does the discrepancy between the parallel and official exchange

rates for the Lebanese Pound significantly impact the replicability ofthe MSCI Lebanon Index?

• Would the current restrictions imposed by banks pose a problem interms of replicating the potential reclassification?

• Do you agree with implementing the reclassification coinciding with

the February 2021 QIR?
o Is it warranted to reclassify Lebanon earlier?
o Alternatively, is it appropriate to implement the reclassificationas part of the May 2020 Semi-Annual Index Review?
Click to add footnotes or disclosures.

5AppendixSECTION SUBTITLE GOES HERE

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MSCI Market Classification Framework• Frontier Markets require at least a partial level of ease of capital
inflows/outflows.

Click to add footnotes or disclosures.

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