KARACHI: In a surprise move, Morgan Stanley Capital International (MSCI) in its Quarterly Index Review announcement has added 15 Pakistan stocks to the MSCI Frontier Market Index and 41 stocks to the MSCI Frontier Markets Small Cap Index.
With addition of 15 stocks into MSCI FM index, the index has now a total of 17 constituents which includes OGDC, MARI, PPL, LUCK, MCB, UBL, ENGRO, HBL, POL, SYS, FFC, HUBC, EFERT, MTL, BAFL, PSO, and TRG. Earlier, there were only two stocks namely OGDC and ENGRO.
Similarly, MSCI FM Small Cap index has now a total of 41 constituents.
Earlier there were 14 stocks in Frontier Small Cap Index.
Pakistan has now 58 stocks in MSCI FM index, out of which 17 stocks are in MSCI FM Index and 42 stocks are in MSCI FM Small Cap Index.
“After this re-balancing we estimate Pakistan’s weight is likely to increase from 0.6 percent to around 2-3 percent”, Muhammad Sohail, leading analyst and CEO of Topline Securities said.
The changes to MSCI Frontier Market index will be effective from August 31, 2023.
To recall, Pakistan was reclassified into MSCI Frontier Market from Emerging Market in November 2021. Foreign participants’ interest is back in Pakistan. In last 6 weeks, foreign corporates has done net buying of $27 million.
Inspite of FX issues, Pakistan Central Bank has been smooth in remitting foreign portfolio investment funds.
“Starting from the next month, i.e., September 2023, these modifications will lead to an upward revision in Pakistan’s weight within the MSCI FM Index, with the new weight being 2.7 percent, a substantial rise from the current weight of 0.6”, an analyst at Arif Habib Limited said.
In USD terms, the cumulative market capitalization of stocks added to the MSCI Pakistan FM Index has grown by 15 percent since the last MSCI review (effective from June 01, 2023).
The MSCI has also made adjustments to the MSCI Pakistan Small Cap Index, with the inclusion of 41 stocks in the index and the combined market capitalization of the stocks added to the MSCI Pakistan Small Cap Index in USD has surged by 19 percent since the last MSCI review (effective from June 01, 2023).
It is pertinent to highlight that, among all the countries, Pakistan has experienced the most significant increase in weight in the FM Standard Index (+2.1 percent). In contrast, heavyweight countries like Morocco, Romania, and Kazakhstan have witnessed a decline of 1.2 percent, 1.0 percent, and 1.1 percent, respectively. Overall, this review is anticipated to have a positive impact on the market.
Copyright Business Recorder, 2023
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