MSCI FM Index: Pakistan’s weight to go up by 30-40bps with NBP’s addition

KARACHI: MSCI has announced the results of its index review for May 2024, based on which, one more scrip of Pakistan, National Bank of Pakistan (NBP) is added to its MSCI Frontier Market Index.

There is no change in MSCI small cap index for Pakistan.

After this review, there would be total 21 constituents in MSCI standard index including HUBC, UBL, LUCK, ENGRO, MCB, HBL, EFERT, BAHL, PPL, OGDC, MTL, MARI, FFC, SYS, POL, PSO, BAFL, TRG, ILP, SNGP and NBP. While for the MSCI Small Cap Index, there are 56 constituents from Pakistan.

Overall weight of Pakistan in MSCI Frontier Market Index with inclusion of NBP and increase in free float market cap of existing 20 constituents by 12 percent is likely to increase weight of Pakistan by 30-40bps to 4.0-4.3 percent, Muhammad Sohail, leading analyst and CEO of Topline Securities said.

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

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 percent in USD terms since February 01, 2024 (last review) compared to 5.0 percent decline in MSCI Frontier Market Small Cap Index, he added.

“We estimate Pakistan weight to increase in range of 50-60bps in MSCI Small Cap Index to 3.4-3.5 percent,” Sohail said.

Regarding inflows estimation, he said according to news reports and using proxy approach of emerging market index, AUMs benchmarked to MSCI FM Index are approximately $10 billion (free float of FM index is $119 billion).

“With this number, we expect gross inflow of $30-40 million due to change in overall weight and addition of NBP,” Sohail said.

To note, foreign corporates since May 02, 2024 have already bought shares worth of $34.4 million and sold worth of $20.7 million.

“After looking at the buying pattern of foreigners in last one/two week, we believe, Pakistan has already partially witnessed a portion of inflows, while rest of inflows will be coming till its implementation date i.e. Jun 03, 2024,” he added.

An analyst at Arif Habib Limited said Pakistan’s weight in the FM standard index is expected to be around 3.7 percent.

He said the KSE-100 Index outperformed all MSCI frontier markets and MSCI FM Index during FY24-to-date with a return of 85 percent.

Also, Pakistan remains second most liquid market in MSCI FM space with an average daily traded value of $54.2 million in FY24-to-date.

“Overall, we expect NBP weight of around 0.06 percent in the MSCI main index with the expected inflow of $2.5 million (17.5 million shares on last closing).”

Copyright Business Recorder, 2024