FTSE Russell, MSCI Consult on Impact of China Sanctions

FTSE Russell is seeking views on the impact of the sanctions on its indexes. MSCI is asking about the impacts on investment processes.

Index compilers FTSE Russell and MSCI have opened consultations seeking market views on how to treat index constituents impacted by sanctions-related purchasing restrictions.

Earlier this month, the Trump administration issued an executive order prohibiting US persons from purchasing securities of companies identified as being owned or controlled by China’s military – effective from 11 January 2021.

FTSE Russell says it understands the affected companies to be those listed by the US Department of Defense, adding that it has asked OFAC to confirm the scope of the sanctions.

Under FTSE Russell’s normal policy, sanctioned securities would have to be deleted from its indexes.

“In the light of the imminence of the effective date of the Executive Order, FTSE Russell is seeking rapid feedback from clients and other stakeholders on the scope of the sanctions and the timing of the deletion of the affected securities from FTSE Russell indexes,” it said.

The consultation paper, available here, is open for feedback until the US market close on Friday (27 November).

FTSE Russell intends to confirm equity index treatment following the US market close on 4 December.

MSCI is likewise seeking market feedback on the impact of the executive order on investment processes, including any practical implications on the use of MSCI indexes.

It is also seeking views on whether any changes to existing indexes or the introduction of new indexes may be necessary or helpful to maintain the investability of relevant MSCI indexes and assist investors to comply with the order.

MSCI invites feedback until 4 December, saying it will communicate the results shortly thereafter.

“A list of MSCI Indexes that currently include the Chinese companies listed in the Order is available to market participants upon request,” it says.

 

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