This is in addition to the financial isolation of the country after it invaded Ukraine.
According to the index giant, it will eliminate Russian stocks that are listed or domiciled in Russia. This includes those trading via American depositary receipts.
S&P Dow Jones stated that Russia will be removed from its “emerging markets” designation due to “deterioration in its markets. Instead, it will classify Russia as “standalone”. This means that Russia companies would need to undergo a new assessment to be eligible for one of three country classifications (developed, emerging, and frontier) by the index company.
This could lead to more foreign investment being taken from Russian companies. Many American mutual funds and ETFs rely on the Dow Jones and S&P 500 indices to build their portfolios. A company being removed from an index means that index-based funds won’t buy shares in the business. This can often trigger a drop in the stock price.
Russia’s war on Ukraine has had a severe financial impact. Russia’s currency fell by approximately one-third earlier this week, to less than 1c in value after sanctions from the United States, European Union, and United Kingdom.
S&P Dow Jones’ decision comes after Russian financial institutions had blocked Russian companies and individuals from accessing the markets. Reuters reported that the London Stock Exchange suspended trading in Russian stocks this week.
S&P Dow Jones stated that it will continue to publish Russian-specific indexes. However, it pointed out that some of them may contain securities that are not eligible for investment by citizens from the United States, Britain, and Europe. These indices include S&P Russia BMI and Dow Jones Russia Index.
The Dow Jones Russia Index plunged 95% since February 24, 2014, when Russia attacked Ukraine. The S&P Russia BMI has fallen 41% since that date.
