MORGAN STANLEY INCREASES RUSSIAN COMPANIES' WEIGHT BY 15%

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MOSCOW, May 14 (RIA Novosti) - Morgan Stanley investment bank announced changes in its stock indexes yesterday, causing the weight of the Russian index in the regional index MSCI Emerging Market grew by 15%. It was the biggest increase in the weight of Russian companies in the MSCI index in the past few years, Kommersant reported.

Because of this, the MSCI Russia index includes new papers - MTS, VimpelCom, AFK Sistema, the steel group Mechel, Wimm-Bill-Dann, VolgaTelecom and Transneft. The weight of shares that had been included in the index before, like those of LUKoil, Surgutneftegaz and Norilsk Nickel, decreased. Mosenergo shares were removed from the index.

Experts describe the increase, which many big investors use as a guideline for forming their portfolio, as a clearly positive factor for Russia as a whole.

In the past, the MSCI index included only the shares that were actively marketed in the RTS and MICEX. But now it also includes Russian companies whose papers are marketed on Western exchanges like the London Stock Exchange and the New York Stock Exchange.

This will give additional support to the Russian shares, said Alex Kantarovich, chief strategist at Aton. Funds with equities worth $100 billion take into account MSCI Emerging Market indexes when deciding how to invest. Fund manager's attention will be drawn above all to the new companies included in the index, Kantarovich said.

This will have the biggest effect on the least liquid of companies included in the index - VolgaTelecom and Transneft, said Ovanes Oganesyan, an analyst with Renaissance Capital. A big fund that invests 2% of its portfolio in Transneft shares will greatly increase the quotations of the liquid company, he said.

Changes in the indexes are effective since May 31, but investors are expected to form their portfolios in advance.

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