At the close of trading today, the first half of changes to the MSCI indices (adjustment for free float and for extension of coverage) will become effective. The adjustment is negative for the Czech Republic’s weight in the various indices, given the below-average free float of Czech blue chips. In the “Emerging Markets Free Index,” for example, the weight of the country dropped pro-forma from 0.77% to 0.61% (based on May 5 data, according to the MSCI); the country’s weight in the MSCI’s “All Country World Index” dropped pro-forma from 0.03% to 0.02% (based on October 1 data).
As for individual stocks, the most vulnerable to the free-float adjustment should be Cesky Telecom (because of its lowest free float (22% or 15.5%, depending on definition of free float), followed by Ceska sporitelna, CEZ, Philip Morris CR, Komercni banka and Unipetrol. Because it is the most traded blue chip and because of its lowest free float (22% or 15.5%, depending on definition of free float), Cesky Telecom would likely suffer most if there is any MSCI-related trading.
The strength of the adjustment effect on the stocks remains to be seen (some of the portfolio changes may have been already carried out, and only half of the planned adjustment is effective today, the rest in May 2002).
(Ondrej Datka)