Index Alert Research Slava Smolyaninov, [email protected] www.bcsgm.com Yulia Goldina, [email protected] Vasiliy Mordovtsev, [email protected] MSCI August QIR Preview

17 June 2020 – A Shoo-in for Inclusion

MSCI will announce the results of its Quarterly Index Review on 12 August – Weights in MSCI index, % effective rebalancing date 1 September. We expect Yandex local shares to New (pro- change, be added to the MSCI Russia Standard with a pro-forma weight of c5.9%. Current* forma) ppt 17.2 16.2 -1.0 . QIR results to be released 12 August, effective 1 September SBERBANK RUSSIA COM 16.6 15.6 -0.9 . Yandex has a high chance of inclusion in Russia Standard index HOLDING 16.6 15.6 -0.9 9.1 8.6 -0.5 o Pro-forma weight of c5.9%; c$589mn inflows; c5days to cover 7.3 6.9 -0.4 . POLY’s NoS will be adjusted up by 0.33% YANDEX 5.9 5.9 COMMON 6.1 5.7 n/m . MSCI 10-40 – Yandex the new constituent 3.2 3.0 n/m 2.6 2.4 n/m MSCI August QIR – Russia benchmark to widen with YNDX 2.3 2.2 n/m MSCI will announce the results of its August 2020 Quarterly Index Review POLYMETAL INTL 2.2 2.1 n/m X5 GROUP 2.1 2.0 n/m (QIR) on 12 August with the effective rebalancing date on 1 September. We MOBILE TELESYS 2.2 2.0 n/m do not expect any deletions during this review. As such, given Yandex’s SURGUTNEFTEGAZ COMN 2.1 2.0 n/m inclusion is highly likely, we expect MSCI Russia’s weight to widen in MSCI EM SURGUTNEFTEGAZ PREF 1.8 1.7 n/m 1.4 1.3 n/m Index from the current 3.4% (as of yesterday’s close) to 3.6% (pro-forma). INTER RAO UES 1.4 1.3 n/m ALROSA 1.2 1.1 n/m Yandex – a shoo-in for inclusion with a pro-forma weight of c5.9% 1.2 1.1 n/m The last business day of June is the relevant cutoff date for data used for EXCHANGE 1.2 1.1 n/m PHOSAGRO GDR 0.9 0.9 n/m liquidity calculations for the August QIR. Nevertheless, we see a very high VTB BANK 0.9 0.8 n/m chance that the local line of Yandex will be added to the Russia Standard MAGNITOGORSK IRON 0.7 0.6 n/m Index. If added today, the stock would have a significant, pro-forma weight of *as of close 16 June 2020 Source: MSCI, BCS GM c5.9% in the Russia Standard Index and c0.21% in MSCI EM, leading to inflows Potential Flows from ETS from passive funds of c$589mn (3M ADTV $118mn) – almost 5 days to cover Expected Days to cover Moscow and US lines combined. Such a sizable weight in the Parent index is Flows, $mn (Mos + DRs), x explained by the significant market capitalization of Yandex. YANDEX 589 5 MAGNITOGORSK IRON (0.6) 0.1 POLY – Small increase in NoS; Neutral VTB BANK (0.9) 0.0 PHOSAGRO (0.9) 0.1 We also expect MSCI to increase the total number of shares (NoS) for (1.1) 0.1 Polymetal by 0.33% (or 1.56mn shares) to 471,791,037 ordinary shares. NOVOLIPETSK STEEL (1.2) 0.1 Nevertheless, we do not expect any positive impact on the stock, as all ALROSA (1.2) 0.0 INTER RAO UES (1.3) 0.0 passive money will be dragged into Yandex. SEVERSTAL (1.3) 0.1 POLYMETAL INTL (1.5) 0.0 MSCI Russia 10-40 – Yandex in SURGUTNEFTEGAZ PREF (1.7) 0.1 As Yandex local shares are likely to be included into MSCI Russia Standard, (2.0) 0.1 SURGUTNEFTEGAZ COMN (2.1) 0.0 the stock is also to be added into the MSCI 10-40 with an approximate weight MOBILE TELE SYSTEM (2.1) 0.0 slightly above 4.5%. Meanwhile, we see no changes in the Top 4 in the MSCI MAGNIT (2.2) 0.0 Russia 10/40 Index for now, unless NVTK outperforms GMKN by 26% in the POLYUS (2.5) 0.1 ROSNEFT (3.1) 0.0 next 2 months. Nevertheless, we do not expect any large flows due to the TATNEFT COMMON (5.9) 0.1 lack of passive money invested in the index. Changes will become effective 1 NOVATEK (7.1) 0.1 NORILSK NICKEL (8.9) 0.1 September (as of close 31 August), the same day as the Parent Index. LUKOIL HOLDING (16.1) 0.1 SBERBANK RUSSIA COM (16.1) 0.1 GAZPROM (16.7) 0.1 Source: Bloomberg, BCS GM

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