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Some Positive Indexing News For A Frontier Markets ETF

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Some Positive Indexing News For A Frontier Markets ETF

After the close of U.S. markets Tuesday, index provider MSCI Inc (NYSE: MSCI) released its annual market classification. Most investors awaiting the MSCI news were focusing on the index provider's decision on whether or not to include China A-shares in its emerging markets benchmarks, but there were other interesting moves.

Pakistan

Some of those moves could spur the iShares MSCI Frontier 100 ETF (NYSE: FM) higher in the near-term. As was widely expected, MSCI decided to elevate Pakistan to emerging markets status. Pakistan becomes the first frontier market since Qatar and United Arab Emirates several years ago to earn the prestigious frontier-to-emerging promotion.

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“MSCI also said that the MSCI Pakistan Index will be reclassified to Emerging Markets status, coinciding with the May 2017 Semi-Annual Index Review,” said MSCI in a statement.

Pakistan is FM's fourth-largest country weight at 10.2 percent. The Global X MSCI Pakistan ETF (NYSE: PAK), the lone ETF dedicated to Pakistani equities, is up more than 12 percent year-to-date.

Argentina

In more good news for FM, Argentina is on MSCI's list for possible reclassification to emerging markets status. That is quite the turn of events for the South American nation, which not long ago, was on MSCI's list for potential loss of its frontier status. Argentina is FM's second-largest country weight behind Kuwait at nearly 18.5 percent.

Global X MSCI Argentina ETF (Global X Funds (NYSE: ARGT)) is one of this year's best-performing Latin America ETFs with a gain of 18.8 percent.

Nigeria

There is also some potentially concerning news for some of FM's geographic exposure. Nigeria, Africa's second-largest economy, is in danger of losing its frontier status.

“MSCI further announced that the MSCI Nigeria Index may be removed from the MSCI Frontier Markets Index and reclassified as a stand-alone market due to capital mobility issues. MSCI said it will consult with international institutional investors over the coming three months on a reclassification proposal that could be implemented with the November 2016 Semi-Annual Index Review,” said MSCI.

Nigeria is Africa's largest oil producer and is a member of the Organization of Petroleum Exporting Countries (OPEC). FM is home to two OPEC members, Kuwait and Nigeria, though the ETF devotes just over 11 percent of its weight to energy stocks.

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