Prague, 4 November 1997 (RFE/RL) -- An official from the International Finance Corporation says that Russia's inclusion this week in a benchmark IFC stock index could easily bring as much as $380 million into Russia from foreign institutional investors.
The IFC, the private sector arm of the World Bank, had announced Russia's inclusion on its Composite Investables Index in July. But Russia's precise weighting in the index wasn't announced until late yesterday. Russia's inclusion became effective yesterday.
Constantinos Grigoriadis, an IFC official responsible for non-U.S. equity and emerging markets, says Russian companies will comprise about 5.6 percent of the weighting in the index for Europe, the Middle East and Africa.
He said about $9.5 billion in assets are managed by investment funds that follow the index and it would be a conservative estimate to say that about 4 percent of those institutional assets would go to Russia.
The weightings of four other newly-included countries also were announced. They are Israel with 2.4 percent; Morocco with 0.8 percent; Egypt with 0.8 percent and Slovakia with 0.1 percent.
The IFC publishes two sets of emerging markets indexes -- "global" and "investables." The investables index focuses on stocks that can be easily purchased by foreign investors. The main criteria for inclusion on that list is the size of the company, the total value of its shares on the market, the firm's liquidity and the amount of shares that trade on a typical day.
Analysts say the impact of Russia's inclusion won't be immediate. The "Wall Street Journal" today quotes Moscow analysts as saying that many of the funds have already moved into the Russian market since the change was announced last July.
Peter Kizenko, chief equity trader at ING Barings in Moscow, told Bloomberg News that the change would be positive in the long run. Russian stocks fell last week amid turmoil on international markets. Some investors now think they are under-valued.
The IFC's Grigoriadis says some emerging market funds are choosing stocks selectively. Grigoriadis says: "They go back and buy on weakness, and they are paying extra attention to the second tier (energy companies) and telecoms."
Grigoriadis said investors also are looking for what he described as "good undiscovered opportunities."