WASHINGTON, D.C., September 23, 1999 -
Standard & Poor's and the International Finance Corporation today announced that S&P has signed a letter of intent to acquire IFC's highly successful indices of emerging markets stock performance as part of a broad, new strategic collaboration between the two organizations.
Acquisition of the Emerging Markets Data Base (EMDB) will expand dramatically the global coverage of Standard & Poor's index services business, already the foremost provider of investable index products in the world. The EMDB, the first and the most comprehensive compilation of emerging markets information, covers 54 markets and more than 2,200 stocks. More than $8 billion of assets are managed against IFC's emerging markets index operations.
Under the proposed agreement, Standard & Poor's will assume operating responsibility for the EMDB as an ongoing business within its global index business. The transaction is expected to be finalized before year-end. IFC and Standard & Poor's also will collaborate on the development of new information products in emerging markets.
IFC initiated the sale to meet its clients' demand for benchmarks to match investors' increasingly global portfolios, a need that would be more effectively served by inclusion of the EMDB indices in a global index product.
"We are convinced that putting our indices in the hands of a world-class information provider is the best way to continue to serve our developing member countries," said Executive Vice President of IFC Peter Woicke. "Only by being allied with a global index will companies from the emerging markets continue to receive the attention they deserve from international portfolio investors.
"We are also very excited about the potential benefit to our members and our organization of some of the new product concepts we will be developing in collaboration with Standard & Poor's," Mr. Woicke added.
Standard & Poor's is a global leader in financial information with a long-term business commitment to emerging markets and the development of products and industry standards that lead to increased market transparency globally.
"Given the globalization of performance measurement and index-based asset management, Standard & Poor's is committed to offering investors the broadest, most comprehensive, and most consistently maintained set of global market benchmarks," said Leo C. O'Neill, President of Standard & Poor's. "The EMDB consists of a superior set of data on emerging markets, and we look forward to including it in our index family."
In 1981, IFC pioneered the collection of data on emerging stock markets which became the basis of its EMDB indices. The decision to sell EMDB is consistent with IFC's approach to its investment portfolio: IFC targets products or regions that do not yet attract broad market interest; and when private investors recognize the potential, IFC goes on to identify new opportunities. EMDB, however, is unique in that it is IFC's only non-investment operation that is run as a commercial business.
"We use our resources for innovations that the market is not yet ready to undertake. The measure of our success is when the market moves in, and we move on," Mr. Woicke said.
The transaction involves not only the sale of the database, but an understanding that IFC and Standard & Poor's will work together to develop new emerging markets information services. Under the arrangement, IFC continues to support transparency in emerging markets through collaborating on new types of information that will help not only international investors but also local investors and financial institutions in developing countries.
"The amount of capital that is being channeled into emerging markets is only going to increase over the long term, and that means that investors and market participants worldwide need the tools that allow them to measure performance objectively," Mr. O'Neill said. "This is at the heart of Standard & Poor's mission—to provide people with the tools and information they need to make well-informed financial decisions—and collaborating with the IFC on emerging market projects underscores our goal to develop the best possible tools and services for investors."
IFC will continue to be associated with the EMDB through mechanisms such as IFC's participation in a global index advisory panel to be created by Standard & Poor's. The terms of the transaction were not disclosed.
EMDB information is available in publications, including the annual Emerging Stock Markets Factbook, and electronically on the worldwide web at www.ifc.org/emdb. The EMDB has three families of indexes: the IFCI (Investable) index, which measures returns on stocks that are available to foreign investors; the IFCG (Global) indexes, which track the performance of the most active stocks in their respective stock markets even if the stocks are unavailable to foreign investors (the broadest indicator of market movements); and the IFCF (Frontier Markets) index of 20 smaller markets.
IFC created the EMDB in order to help stimulate flows of private capital to emerging markets and make them credible destinations for investment. Today, the EMDB provides daily coverage of 34 stock markets and weekly and monthly reports of another 20 less liquid "frontier markets". IFC has played a leading role in providing reliable and comprehensive information on stock markets in developing countries since the first IFC stock markets research unit was created in 1975 and coined the term "emerging markets".
Standard & Poor's, a division of The McGraw-Hill Companies, provides financial information, analysis, advice, and credit ratings globally. Its Index Services unit maintains a wide variety of investable portfolio indices, including the S&P 500 for the U.S., the S&P/TSE 60 for Canada, the S&P Euro and Euro Plus for Continental Europe, the S&P/TOPIX 150 for Japan, and the S&P Asia/Pacific 100. Indices for Latin America and the United Kingdom are expected to be launched early this fall. Further information can be found at www.spglobal.com.
Founded in 1888, The McGraw-Hill Companies is a leading information services provider meeting worldwide needs in education, business, finance, the professions and government. The corporation employs 16,500 people located in more than 400 offices in 32 countries. Sales in 1998 were $3.7 billion.
The mission of IFC, part of the World Bank Group, is to promote private sector investment in developing countries, which will reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments.
