Frontier Markets To Be In DJ Classification

Via Index Universe, news that Dow Jones Indexes, one of the leading global index providers, is planning a new country classification system that will include frontier markets as a separate category for the first time.  As the article notes:

“…The new system will begin to take effect in March 2011.

Seventeen of the 35 countries currently classified as emerging markets will join the new frontier markets list, which will have a total of 20 countries, a spokeswoman at the New York-based firm said. Also, two countries previously classified as developed will be downgraded to emerging markets status. The spokeswoman didn’t elaborate.

The launch of a frontier markets category reflects growing investor appetite for assets outside the U.S. For example, the Vanguard Emerging Markets ETF (NYSEArca: VWO) is the most popular ETF in the U.S., and analysts are in broad agreement that investors are increasingly open to taking on risk in frontier markets.

The company said frontier markets are typically much less accessible to foreign investors than other markets; exhibit notable limitations in their regulatory and operational environments; and have smaller landscapes of investments.

In addition to the 20 frontier market countries, the new Dow Jones Indexes system will have a total of 20 emerging market countries and 25 developed market countries. In all, the three-tiered scheme of categorization includes 65 countries, as the table below shows.

Rollout And Monitoring

The company will roll out the system in stages, beginning with the March 2011 review. The transition of each index or index family from the old classification system to the new one will be announced individually, the company said in a press release.

The new system, which will be reviewed each June, builds on the firm’s previous system that distinguished solely between developed and emerging-market countries. A public announcement of classification changes, if any, will be made in September of each year, with changes implemented with at least six months’ notice, it said.

All countries included in the indexes will be researched individually and assessed according to a predefined framework built around the needs of international portfolio investors in three broad categories: market and regulatory structure; trading environment; and operational efficiency, the company said in its prepared statement.

Extraordinary Reclassifications

The company also said its Index Oversight Committee will revisit a country classification on an “as-needed basis” if there is a material change in any of the assessments.

Should the committee decide that a classification change is warranted, Dow Jones Indexes will provide a minimum of 90 days’ notice before a reclassification is implemented.

It said these types of unusual changes will be implemented with the company’s regular quarterly index review schedule; namely, following the third Friday in March, June, September or December.

Country Dow Jones
Country Dow Jones
Country Dow Jones
Australia Developed Brazil Emerging Argentina Frontier
Austria Developed Chile Emerging Bahrain Frontier
Belgium Developed China Emerging Bulgaria Frontier
Canada Developed Czech Republic Emerging Colombia Frontier
Denmark Developed Egypt Emerging Cyprus Frontier
Finland Developed Hungary Emerging Estonia Frontier
France Developed India Emerging Jordan Frontier
Germany Developed Indonesia Emerging Kuwait Frontier
Greece Developed Malaysia Emerging Latvia Frontier
Hong Kong Developed Mexico Emerging Lithuania Frontier
Iceland Developed Morocco Emerging Malta Frontier
Ireland Developed Peru Emerging Mauritius Frontier
Israel Developed Philippines Emerging Oman Frontier
Italy Developed Poland Emerging Pakistan Frontier
Japan Developed Russia Emerging Qatar Frontier
Netherlands Developed South Africa Emerging Romania Frontier
New Zealand Developed South Korea Emerging Slovakia Frontier
Norway Developed Taiwan Emerging Slovenia Frontier
Portugal Developed Thailand Emerging Sri Lanka Frontier
Singapore Developed Turkey Emerging U.A.E. Frontier
Spain Developed
Sweden Developed
Switzerland Developed
United Kingdom Developed
United States Developed

This entry was posted on Wednesday, January 19th, 2011 at 6:38 pm and is filed under Uncategorized.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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Wildcats & Black Sheep is a personal interest blog dedicated to the identification and evaluation of maverick investment opportunities arising in frontier - and, what some may consider to be, “rogue” or “black sheep” - markets around the world.

Focusing primarily on The New Seven Sisters - the largely state owned petroleum companies from the emerging world that have become key players in the oil & gas industry as identified by Carola Hoyos, Chief Energy Correspondent for The Financial Times - but spanning other nascent opportunities around the globe that may hold potential in the years ahead, Wildcats & Black Sheep is a place for the adventurous to contemplate & evaluate the emerging markets of tomorrow.