MSCI has announced its Aug 2025 Index review, wherein 1 new stock of Pakistan is added to the frontier market index, namely Faysal Bank (FABL). This takes the total number of constituents in the MSCI Frontier Index to 27 from 26. These changes will be implemented as of August 26, 2025.

§  Based on details updated on the MSCI website, in the August 2025 review, the minimum threshold of free float and total market cap for the selection of frontier market stocks was US$90mn and US$181mn, respectively. This threshold is significantly higher by 15-17% than the May 2025 review and largely in line with the performance of the frontier markets.

§  Since last review of MSCI, Pakistan market outperformed the benchmark frontier index by providing total USD return of 24% in May Jun and Jul 2025 (3 months) while return of MSCI frontier markets index was 20.4%.

§ Amongst the existing constituents, 3 scrips are retained despite not meeting the free float criteria for the second consecutive review, namely ILP (US$78mn), ABOTT (US$81mn), SEARL (US$86mn). We believe, under the buffer rule, these stocks are retained.

§ We also saw in the past retention of TRG despite not meeting the threshold, and it was subsequently removed from the index in upcoming reviews.

§  Pakistan weight at 6-6.5%: We estimate Pakistan’s weight in the MSCI frontier market index is close to 6-6.5% with FABL adding 8bps to the total index.

§  Inflow estimation in new additions: The addition of a new company constitutes a weight of 8bps. Assuming US$2-3bn funds tracking the frontier market index globally, the inflows in these companies are estimated at around US$1.5-2.3mn. Given the fact that Pakistan is currently not part of any passive fund manager, in our view, the activity in MSCI-based scrips may remain muted.

§  MSCI Small Cap: MSCI has also added 2 stocks in the small cap index, namely Indus Dyeing (IDYM) and Jubilee General (JGICL). 2 stocks were deleted, namely Habib Sugar (HABSM) and Octopus (OCTOPUS).

Courtesy- Topline Research