MSCI Semi-Annual Index Review Likely to be Positive for Pakistan

Brokerage house, Topline Securities, on Wednesday said that it expects the MSCI Semi-Annual Index Review to be positive for Pakistan.

MSCI will be releasing the results of the MSCI Semi-Annual review announcement on November 14. The changes to the MSCI Frontier Market index will be effective from December 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 in that index to 17.

The scrips in the Frontier Market Standard Index include 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 the August 2023 review, according to the report.

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

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

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 6 months from May-Oct 2023.

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

However, the market capitalization of the Top 5 Frontier Market countries which account for 60 percent weight in the FM index declined by 1 percent while the index is only up by 4 percent in the period under review.

Considering the above factors, Topline said it anticipates that Pakistan’s weight will further increase in the upcoming Semi-Annual index review, given the 21 percent increase in overall market cap and 26 percent in an index.

The addition of a few securities to the MSCI Standard Index cannot be ruled out. It also believes that few securities may be moved from the MSCI Standard Index to the MSCI Small Cap Index. The brokerage house said that the likely increase in Pakistan’s weight will be positive as some more foreign flows will come to Pakistan.

Source: Pro Pakistani