MSCI (Morgan Stanley Capital International) is a leading provider of investment decision support tools and services. It is best known for its stock market indices, which are widely used as benchmarks for international equity portfolios.
MSCI indices are important because they provide a benchmark for measuring the performance of investments in different markets. For example, the MSCI World Index is a widely followed benchmark for global stock markets, and the MSCI Emerging Markets Index is a benchmark for emerging market equities. By tracking these indices, investors can see how their portfolios are performing relative to a broad market benchmark and make informed investment decisions accordingly.
In addition to serving as benchmarks, MSCI indices are also used by index funds and exchange-traded funds (ETFs) as the basis for their portfolios. By investing in an MSCI-linked ETF, investors can gain exposure to a particular market or sector, such as emerging markets or technology, without having to select individual stocks. This makes MSCI indices a convenient and effective way for investors to gain broad-based exposure to different markets and sectors.
Overall, MSCI indices play a crucial role in the investment industry by providing a benchmark for measuring investment performance and helping investors make informed decisions.
What are the circumstances under which a company gets removed from the MSCI indices?
A company can be removed from the MSCI indices under various circumstances. Some of the most common reasons include:
- Mergers and Acquisitions: If a company is acquired by another company or merges with another firm, it may be removed from the MSCI indices, depending on the terms of the merger or acquisition.
- Delisting: If a company is delisted from the stock exchange on which its shares are traded, it will be removed from the MSCI indices. This can happen for a variety of reasons, including financial difficulties, regulatory issues, or a change in the company’s business model.
- Market capitalization: MSCI periodically reviews the market capitalization of the companies included in its indices, and companies with a market capitalization below a certain threshold may be removed.
- Corporate Actions: Companies can also be removed from the MSCI indices due to other corporate actions, such as stock splits or reverse stock splits, which can affect the company’s market capitalization.
- Country Reclassification: If a company’s country of domicile is reclassified by MSCI, the company may be moved to a different index or removed from the index altogether.
In general, MSCI strives to maintain the highest standards of quality, transparency, and accuracy in its indices, and will remove companies from its indices if they no longer meet these standards. The specific criteria for removal can vary depending on the index and the individual circumstances of each company.