Reclassification: MSCI adds NBP to Frontier Market Index

In a positive development, Morgan Stanley Capital International (MSCI) Inc., in its results of the May 2024 index review, added the National Bank of Pakistan (NBP) as a constituent in its MSCI Frontier Market Index.

Meanwhile, there was no change in MSCI Small Cap Index for Pakistan. The changes will take place as of the close of May 31, 2024, it said.

After the latest review, Pakistan will have 21 constituents in MSCI standard index including:

• Hub Power Company Limited,

• United Bank Limited,

• Lucky Cement Limited,

• Engro Corporation,

• MCB Bank Limited,

• Habib Bank Limited,

• Engro Fertilizers Limited,

• Bank AL Habib Limited,

• Pakistan Petroleum Limited,

• Oil & Gas Development Company Limited,

• Millat Tractors Limited,

• Mari Petroleum Company Limited,

• Fauji Fertilizer Company Limited,

• Systems Limited,

• POL, PSO, BAFL, TRG, Interloop Limited, SNGP and NBP.

MSCI adds 19 Pakistani companies to Small Cap, 3 to Frontier Markets Indexes

“Overall weight of Pakistan in Frontier market index with inclusion of NBP and increase in free float market cap of existing 20 constituents by ~12% is likely to increase weight of Pakistan by 30-40bps to 4.0-4.3%,” said Topline Securities, in a note.

“Similarly, Pakistan weight in MSCI Small Cap Index is also likely to increase despite no addition of any scrip in the index as existing 56 constituents of Pakistan have returned 16% in USD terms since Feb 01, 2024 (last review) compared to 5% decline in MSCI Frontier market small cap index,” said the brokerage house.

“We estimate Pakistan weight to increase in range of ~50-60bps in small cap index to 3.4-3.5%.”

In September 2021, Pakistan was downgraded from its status as an emerging market, a little over four years after it was reclassified from the Frontier Markets (FM) Index by MSCI.

The MSCI had said then that while the Pakistani equity market meets the requirements for market accessibility under the classification framework for Emerging Markets, it no longer meets the standards for size and liquidity.