MSCI may cap India, Brazil weights

singapore — MSCI, one of the world’s biggest index compilers, is placing emerging markets including India and Brazil on notice for limiting investor access.

The two countries, along with Turkey and South Korea, are “potential future examples” of markets whose weights could be capped on MSCI indexes, the New York-based company said in a presentation on its website Wednesday. All four countries restrict the use of their local data in derivatives created by offshore exchanges, which puts them afoul of MSCI’s anti-competition clause, and India also has a “lengthy and burdensome mandatory

It is expected that stock exchanges, which often have legal or natural monopolies, should not impose clauses in their provision of data MSCI statement

registration process” for foreign investors, MSCI said.

MSCI will now consult its clients and announce the results by December 31.The presentation is part of a broader review on how funds access global equity markets and shows the influence of firms like MSCI in lobbying for institutional investors. Since MSCI indexes are tracked by money managers with trillions of dollars in assets, any cap could limit inflows into a market and force a change in national policy.

“It is expected that stock exchanges, which often have legal or natural monopolies, should not impose clauses in their provision of stock market data,” MSCI said. “The existence of these types of practices will lead to a negative assessment.”

MSCI CEO Henry Fernandez has been vocal about his concerns regarding a dispute between India’s largest exchange and Singapore Exchange Ltd. — Bloomberg