Exchange traded funds tracking South Korea, Taiwan and the
Middle East are not the only ones being affected by index
provider MSCI's (NYSE:
) annual market reclassification, which was revealed Tuesday
after the close of U.S. markets.
While the iShares MSCI South Korea Capped Index Fund (NYSE:
) and the iShares MSCI Taiwan Index Fund (NYSE:
) are trading only slightly lower after MSCI, as expected, kept
those countries as emerging markets
, another pair of
is being taken to task by investors following the MSCI news.
Shares of the Global X FTSE Greece 20 ETF (NYSE:
) are down 2.6 percent and are trading at the lowest levels in
six weeks after MSCI became the second index provider to demote
Greece to emerging markets status from developed market.
"MSCI will reclassify the MSCI Greece Index to Emerging
Markets as part of the November 2013 Semi-Annual Index review,"
said MSCI in a statement
. "The MSCI Greece Index fails to qualify on several market
MSCI noted that developed markets "reflect continuous market
improvements introduced by authorities in other countries over
the years," but that few of the those improvements are reflected
in Greece. Greece fails to meet MSCI criteria on securities
lending, short selling, lending facilities and transferability.
The index provider added that the MSCI Greece Index has not met
its standards for developed market status for the past two years,
according to ETF Trends
Indeed, Greece's demotion to developing market is newsworthy,
but it is not the epic event that some mainstream media outlets
would lead investors. After all, and as was just noted, MSCI is
not the first index provider to demote Greece. Russell
did the same in March
GREK proceeded to tumble after that and if the ETF closes
below $16 today, it will be the first time in two month it has
GREK is not the only ETF being hit by MSCI's comments. The
Market Vectors Egypt ETF (NYSE:
), which is already
dealing with ample domestic and regional
, is down 3.6 on above average volume after MSCI said the North
African nation is on review for a possible demotion to frontier
market status from emerging market.
Such a move is possible as MSCI proved by lowering Morocco
from emerging market to frontier. Among other issues, MSCI cited
the previously reported issue
of Egypt's dwindling foreign currency
as one reason the country is in danger of losing its emerging
The index provider said it is "closely monitoring" the
situation in Egypt and added that it might be forced to launch a
public consultation with the investment community regarding
Egypt's place in the MSCI Emerging Markets Index. As it is, Egypt
accounted for just 0.13 percent of the iShares MSCI Emerging
Markets Index Fund (NYSE:
) at the end of the first quarter,
according to iShares data
This is how poorly EGPT is reacting to the specter of Egypt
becoming a frontier market: Not only did the ETF touch a new
52-week low today, but the fund is trading below the worst levels
seen following the 2011 Arab Spring.
For more on ETFs, click
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