By Angela McDaniels
Tacoma, Wash., March 17 - Merrill Lynch & Co., Inc. has developed three new Local Debt Market indexes designed to track the performance of emerging market sovereign debt denominated in the issuer's local currency, according to a company news release.
The Merrill Lynch Local Debt Markets Plus index (symbol: LDMP) is a broad composite index designed to track the performance of local-currency sovereign debt of countries with a foreign-currency long-term sovereign debt rating of A1 or lower based on an average of ratings from Moody's Investors Service, Standard & Poor's and Fitch Ratings.
The Merrill Lynch Net Cap-Weighted Liquid Local Debt Markets index (symbol: GLEM) is an index representing a liquid basket of fixed-rate bonds with country allocations based on their relative capitalization weights in Merrill Lynch's corresponding broad country indexes.
The Merrill Lynch Net Equal-Weighted Liquid Local Debt Markets index (symbol: GLEE) is an index representing a liquid basket of fixed-rate bonds with equally weighted country exposure.
The company said that since its chosen inception date, Dec. 31, 2005, the Local Debt Markets Plus index has nearly doubled in size to $1.4 trillion.
To qualify for inclusion in the Merrill Lynch Local Debt Markets Plus index, a country must have at least $10 billion outstanding principal amount of index-qualifying debt and must have at least one readily available, transparent price source for its securities.
In addition, the following countries are excluded from the index: G10 countries, euro members and all countries with a foreign-currency long-term sovereign debt rating of Aa3 or higher. Currently, the index includes 396 bonds of 16 issuing countries having a total market capitalization of $1.4 trillion. The bonds are listed in table 1 below.
Qualifying countries for the Liquid Local Debt Market indexes are selected annually. For each country, a single representative bond is selected based on liquidity and duration criteria, the release stated. Currently qualifying countries, and their respective weights in the two Liquid Local Debt Market indexes as of Feb. 29, are shown in table 2 below.
Table 1: Local Debt Markets Plus index constituent countries
| Country | Bonds | Weight | Market value (millions)
|
| Brazil | 7 | 8.64% | $124,046
|
| China | 65 | 10.00% | $143,555
|
| Czech Republic | 14 | 4.36% | $62,575
|
| Hungary | 20 | 4.74% | $68,010
|
| India | 65 | 10.00% | $143,555
|
| Indonesia | 25 | 3.16% | $45,297
|
| Israel | 8 | 2.32% | $33,261
|
| Malaysia | 34 | 6.74% | $96,812
|
| Mexico | 16 | 8.84% | $126,853
|
| Philippines | 33 | 1.64% | $23,526
|
| Poland | 12 | 10.00% | $143,555
|
| Russia | 18 | 3.88% | $55,744
|
| South Africa | 9 | 4.71% | $67,677
|
| South Korea | 29 | 10.00% | $143,555
|
| Thailand | 34 | 5.67% | $81,363
|
| Turkey | 7 | 5.31% | $76,163
|
| Total | 396 | 100.00% | $1,435,546
|
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| Table 2: Liquid Local Debt Markets index qualifying countries
|
| Country | Market-cap index weight | Equal-weighted index weight
|
| Brazil | 13.18% | 10.65%
|
| Hungary | 7.71% | 9.37%
|
| Indonesia | 5.22% | 10.30%
|
| Israel | 5.32% | 10.66%
|
| Malaysia | 11.47% | 10.30%
|
| Mexico | 13.68% | 10.44%
|
| Poland | 18.68% | 10.41%
|
| Singapore | 7.97% | 10.41%
|
| South Africa | 8.30% | 8.49%
|
| Turkey | 8.47% | 8.96%
|
| Total | 100.00% | 100.00%
|
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