SOURCE: Russell Investments

Russell Investments

June 18, 2014 09:10 ET

Russell Indexes to Reclassify Egypt as a Frontier Market at Upcoming Reconstitution

SEATTLE, WA--(Marketwired - Jun 18, 2014) - The Egyptian equity market as measured by the Egyptian country constituent of the Russell Emerging Markets Index outperformed the Russell Emerging Markets Index and the Russell Frontier® Index since last year's Russell reconstitution and year-to-date as of 13 June. This positive performance has occurred as the nation deals with political uncertainty and assesses results of its recent elections.

Despite the relative political uncertainty in Egypt since the overthrow of President Mohamed Morsi in June of last year, the Egyptian country constituent within the Russell Emerging Markets Index has outperformed the Russell Emerging Markets Index and the Russell Frontier Index from the completion of the last Russell Indexes Reconstitution on July 1, 2013 through June 13 of this year. In fact, from July 1, 2013 through June 13, 2014, the Egyptian country constituent returned more than 76% and, in 2014 year-to-date as of June 13, it has returned nearly 28%.

Russell Investments senior emerging markets portfolio manger Gustavo Galindo:
"While we believe the political situation in Egypt is not yet stable, it seems better than it was a year ago and the Egyptian equity market appears to be willing to give it the benefit of the doubt. Egypt is one of the heavyweight nations economically in Africa, which we see as a growth region. So, while we see Egypt as a volatile market in the short-term, it may be a source of continued investment opportunity longer-term depending on how the political situation evolves."

Russell Investments senior index research analyst Mat Lystra:
"Despite recent strong performance for the Egyptian equity market, our multi-year research process concluded that the sustained macroeconomic uncertainty in Egypt and ongoing concerns around the convertibility of its currency had driven Egypt's market risk to frontier-relative levels. Our decision to reclassify Egypt from emerging market to frontier market status completes a three year market risk review process, or glide path, which began in 2012."

Lystra provides an update on Russell Indexes country classification process and highlights the process which drove the recent decision to reclassify Egypt to a frontier market in a special Index Insights paper on the Russell Indexes 2014 reconstitution website.

Russell Index Returns

Russell Index/Index Country Constituent 2014 YTD as of
June 13, 2014
July 1, 2013 -
June 13, 2014
Russell Emerging Markets Index 8.2% 11.1%
Russell Emerging Markets Index: Egypt 27.8% 76.5%
Russell Frontier Index 12.5% 17.1%

Source: Russell Investments. Returns are total returns (reflect reinvestment of dividends and distributions) and are denominated in euros. 

The Russell Global Index measures the performance of the global equity market based on all investable equity securities, and is constructed to provide a comprehensive and unbiased barometer for the global segment, The Index includes more than 10,000 securities in 47 countries, and covers 98% of the investable global market. All securities in the Russell Global Index are classified according to size, region, country and sector; as a result the index can be segmented into more than 300 distinct benchmarks.

Please note: Indexes are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. Russell's publication of the Indexes or Index constituents in no way suggests or implies a representation or opinion by Russell as to the attractiveness of investing in a particular security. Inclusion of a security in an Index is not a promotion, sponsorship or endorsement of a security by Russell and Russell makes no representation, warranty or guarantee with respect to the performance of any security included in a Russell Index. 

Investments in emerging or developing markets involve exposure to economic structures that are generally less diverse and mature, and to political systems which can be expected to have less stability than those of more developed countries. Securities may be less liquid and more volatile than US and longer-established non-US markets.

The Russell Frontier Index allows access to 33 countries, is float-adjusted and represents 98% of these countries' cumulative, liquid market capitalization. Russell defines frontier countries as those that do not meet the established criteria for membership in the Russell Emerging Markets Index.

Global equity involves risk associated with investments primarily in equity securities of companies located around the world, including the United States. International securities can involve risks relating to political and economic instability or regulatory conditions.

Opinions expressed by Mr. Galindo & Mr. Lystra reflect market performance as of June 13, 2014 and are subject to change at any time based on market or other conditions without notice. Past performance does not guarantee future performance. 

This material is not an offer, solicitation or recommendation to purchase any security.

Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional. The information, analysis and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual entity.

Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company.

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