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KARACHI: MSCI, a leading provider of critical decision support tools and services, announced the results of the May’22 Semi Annual Index Review (SAIR) for its various indices.

The announcement didn’t hold much significance for the local market however the index manager did reduce Pakistan’s weight in the index to around 1.0 percent from around 1.6 percent (the local equities had been allocated in the last review back in September’21).

All the changes announced in the most recent SAIR will be implemented as of the close of May 31, 2022. The MSCI Frontier Market Index saw 11 additions and 3 deletions while MSCI Frontier Markets Small Cap Index saw 19 additions and 16 deletions in the review.

Oil and Gas Development Company (OGDC), was the only Pakistani representative to be upgraded to MSCI Frontier Market Index while HBL was downgraded from the index after it no longer met the market capitalization criteria given the recent underperformance.

Back to the 'smaller pond': MSCI to downgrade Pakistan to Frontier Market

Three Pakistani companies were amongst the 19 additions made to the MSCI Small Cap Index which included Engro Polymer Chemicals (EPCL), Habib Bank (HBL) and Indus Motors Company Limited (INDU) which takes the country’s total representation in the index to 17 members. The updated list includes BAFL, ENGRO, EFERT, EPCL, FFC, HBL, HUBC, INDU, MARI, MTL, PPL, POL, PSO, SEARLE, SYS, TRG and UBL.

MSCI has not yet disclosed details on Pakistan’s inclusion in MSCI FM 100 and MSCI FM 15 percent Country Capped Index which may be shared at a later stage, Jehanzeb Zafar at AKD Securities said.

To recall, MSCI in its last quarterly review in Feb 2022 had notified that Pakistan is now eligible for inclusion in MSCI FM-100 and MSCI FM 15 percent Country Capped Index.

“Market will remain choppy going forward as a host of economic challenges weigh in on the investor sentiments,” Zafar said. Some respite may be provided if the fuel prices are unfrozen in the country which will help the government in its parleys with the IMF. However, the downside of the same will be spiraling inflation which will likely cross 15 percent in the coming months. “We advise investors to remain cautious in the market.”

Copyright Business Recorder, 2022

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