MSCI will release the results of the MSCI Semi-Annual review announcement on Nov 14, 2023. The changes to the MSCI Frontier Market index will be effective from Dec 01, 2023. In the latest quarterly review on August 2023, 14 Pakistan stocks have been moved from the MSCI Small Cap Index to the MSCI FM Standard Index. Additionally, BAFL has been included in the MSCI FM Standard Index, bringing the total number of stocks to 17.

The scrips in Frontier Market Standard Index includes OGDC, PPL, MARI, UBL, LUCK, MCB, ENGRO, HBL, HUBC, FFC, SYS, EFERT, POL, MTL, PSO, BAFL and TRG.

Similarly MSCI also made adjustments to the MSCI Small Cap Index by including 27 stocks, bringing the total number of constituents in the index to 41 in August 2023 review.

This has resulted in Pakistan’s weight in the FM index increasing from ~0.6% to ~2.7% in August 2023.

There are total 21 countries in MSCI Frontier Market where top 5 countries includes Vietnam with share of 29.9% followed by Romania 9.8%, Iceland 9.2%, Kazakhstan 7.2%, and Slovenia 4.8%.

The price cut-off set by MSCI for this Semi-Annual review was any one of the last 10 business days of October 2023. The review period spans of 6 months from May-Oct 2023.

Since May-Oct 2023, Pakistan market capitalization of stocks in MSCI FM Standard Index has increase by 15%, and overall market capitalization of PSX has increased by 21% in US$ terms. The KSE 100 index is also up 26% in US$ period under review.

However market capitalization Top 5 Frontier Market countries which accounts of 60% weight in FM index declined by 1% while Index is only up by 4% in period under review.

Considering above factors, we anticipate that Pakistan’s weight will further increase in upcoming Semi-Annual index review, given the 21% increase in overall market cap and 26% in index.

The addition of a few securities to the MSCI Standard Index cannot be ruled out. We also believe that few securities may be moved from MSCI Standard Index to MSCI Small Cap Index.

We think likely increase in Pakistan weight will be positive as some more foreign flows will come to Pakistan.

Courtesy – Topline Research