UPDATE 2-MSCI to allow overseas listings to be included in major indexes

Fri Jan 16, 2015 3:58pm EST
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(Adds another fund affected by the index change)

By Ashley Lau and Jessica Toonkel

NEW YORK Jan 16 (Reuters) - Index provider MSCI Inc said it plans to change its rules to allow foreign-listed companies traded outside of their home countries to be included in its Global Investable Market Indexes.

The move would allow so-called "orphan companies" such as Chinese online retailer Alibaba and China's online search engine Baidu Inc to be eligible for potential inclusion in both MSCI Global Indexes and MSCI Country Indexes.

Previously, companies that were based in one region, but whose shares were listed in a different region, were not allowed to be included in some of MSCI's biggest emerging markets indexes.

"We feel that global indexes should have as exhaustive coverage as possible," said Pavlo Taranenko, a member of MSCI's Index Research team, noting that the rule change had been a priority for index provider "for quite some time."

On a regional basis, the biggest impact as of now will be for MSCI's China indexes, which will potentially have 17 additions with the rule change, and Hong Kong, with three potential additions. The decisions will be subject to a semi-annual index review in November, at which time foreign-listed companies will become eligible for inclusion in those indexes, as well as in the MSCI Bahrain, Mauritius, Ukraine and Romania indexes.

MSCI decided to hold off on including any additions to its Russia indexes because of concerns around the current market environment.

Some $9.5 trillion in assets track the MSCI Global Investable Market Indexes.   Continued...