JPMorgan Eyes Index Shake-Up After Russia’s Invasion of Ukraine

(Bloomberg) -- JPMorgan Chase & Co. may revise its widely followed bond indexes as sanctions pile up against Russia, a step that could push investment funds that track the benchmarks to stop buying the underlying securities.

The bank said Tuesday it is reviewing the inclusion of some debt from Russia, Belarus and Ukraine in its benchmarks. It also said new securities from sanctioned Russian entities will be excluded from the JPMorgan Emerging Market Bond Index, known as EMBI.

The company is among benchmark-index makers reconsidering the inclusion of Russian assets in the wake of the invasion of Ukraine, which has left Russia increasingly isolated economically and made its securities more difficult to trade. Such decisions can significantly affect demand for assets from investment funds that track such indexes and need to buy the securities.

JPMorgan, which said an estimated $415 billion of assets track its EMBI index, said VTB Bank PJSC and Vnesheconombank were under review for removal from both the EMBI and its Corporate Emerging Markets Bond Index on March 31.

‘Market Disruption'

JPMorgan has also delayed the inclusion of Ukraine's local-currency government bonds in its Government Bond Index-Emerging Markets, referred to as the GBI-EM index. The securities were previously scheduled to be added in at the end of March, but the process “will be on hold until further review due to the ongoing market disruption,” according to the bank.

Russia and Belarus, meantime, are under review for removal from the JPMorgan environmental, social and good-governance indexes beginning March 31. The bank says it will provide additional detail on its implementation and the timeline.

The latest moves come as Wall Street considers the implications of the invasion of Ukraine and escalating sanctions against Russia. On Tuesday, Ukraine's President Volodymyr Zelenskiy accused Russian forces of committing acts of terror, as the Kremlin stepped up its offensive despite rising international anger and a barrage of sanctions directed at Moscow.

MSCI Inc. said it is closely monitoring just how accessible and investable the Russian market is for foreigners and plans to say more by the end of the week. The indexer on Tuesday also downgraded its environmental, social and governance ratings of the governments of Russia and Belarus in response to the invasion.

Sanctioned Entities

Intercontinental Exchange Inc. said it will remove debt issued by sanctioned Russian entities from its fixed-income indexes when they are rebalanced on March 31. S&P Dow Jones said no Russian stocks listed or domiciled in Russia will be added to its indexes until further notice.

Bloomberg LP's index team has started a review of the eligibility of Russian debt in its fixed-income gauges, which will last until March 4. It is also removing sanctioned entities including Sberbank of Russia PJSC from its equity indexes by the market close on March 2.

Bloomberg LP, the parent of Bloomberg News, is also the parent company of Bloomberg Index Services Limited, which administers these indexes.