MSCI, the equity index group, yesterday announced a move that is expected to result in billions of dollars being wiped off the value of companies in continental Europe and Japan.

The US indexer is the main basis for overseas investment decisions by US pension funds and hedge funds.

It has changed its criteria to advise investment only on the proportion of a company's free float of shares actually available through the market rather than the full market value.

The recalculation, seen as providing a more realistic picture of tradeable global assets, will hit companies such as Deutsche Telekom of Germany, where the state owns 40 per cent of the shares, and NTT of Japan, where the government holds 46 per cent of the company.

But the change is expected to benefit the more liberalised economies such as the US and UK.