Not that Iceland really needed another event to bring their economy closer to little more than subsistence level fishing, but they got one Thursday. Down about 94% since the July '07 highs, FTSE decided there was no longer a place for the Icelandic equity index in its universe of over 120,000 indices and gave it the boot. The formerly leverage loving island has seen the market cap of its index decline to just under $2 billion and folks at FTSE could not justify throwing it in any of their four general categories: developed, advanced emerging, secondary emerging and frontier.
Iceland was on FTSE's so-called watch list to join either the developed equity market index or advanced emerging market index. However, FTSE decided against entering it on the frontier index as its stock market is more similar to that of other western nations and that could confuse investors.
Iceland's foreign ministry declined to comment on the FTSE move but said that it remained committed to restructuring its banking system and repairing relations with international investors. "We've already taken a number of steps towards normalisation," said a spokesman.
When Mohamed El-Erian was speaking about the "new normal", being left on the sidelines with teammates like newly investor friendly Zimbabwe was probably not what Iceland was hoping for.
FTSE drops Iceland from equity benchmarks [FT]