Egypt's stock exchange, which has been closed since January 28 after the onset of protests that toppled President Hosni Mubarak, faces the risk of being excluded from MSCI's emerging markets index when the index provider reviews its status in four weeks.

Egypt would face possible exclusion from the index only if its stock market does not reopen before MSCI begins to consider a decision.

Local investors are worried a removal of Egypt from MSCI indexes would trigger a further outflow of money from an already wounded market, which has seen its growth outlook pared to about 4.3 percent of gross domestic product to end-June from the government's previous forecast of 6 percent.

Egypt comprises only about 0.4 percent of the MSCI emerging market index, or about $14 billion in market capitalization, compared to $3.7 trillion of all emerging economies, but the country's economy is seen as a harbinger of others in the region.

The Egyptian stock market's benchmark index fell 6.1 percent on January 26, the day after the protests against Mubarak first flared, and fell another 10.5 percent on January 27; since then the exchange has remained closed.

MSCI has been monitoring the situation since the bourse closed and will continue to do so for a period of 40 business days before having to take any decisive action, according to Sebastien Lieblich, vice president of index research and management at MSCI in Geneva.

"After that period, if the market is still closed, we will start considering a potential reclassification of the market to a stand-alone status," he said.

Once the period ends, MSCI will commence "a lengthy consultation" with the investment community, including exchange officials and regulators, on a potential proposal to reclassify the closed market into a stand-alone index.

"If and when we take a decision to exclude a country from a composite index we want to make sure we have all the information in our hands," Lieblich said.

If Egypt is excluded from the emerging market MSCI indexes, the firm will continue to calculate it but would not be part of the investment opportunities of a portfolio manager that tracks the EM index, he said.

Exclusion of a country from an index does not happen often. The last time MSCI put a country in a "stand-alone status" was Pakistan in 2008 due to rising fiscal deficit, runaway inflation and political uncertainties that plunged the market.

In any case, Lieblich said, Egypt "still has a few weeks before we even get into a situation where we may consider a reclassification."

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