Analysts see no major deletions from frontier market index

KARACHI: MSCI will be releasing the results of the MSCI Quarterly Index Review on February 9, 2022.

The existing constituents of Pakistan in the MSCI Frontier Market Index (FM) include Lucky Cement (LUCK), Habib Bank (HBL), and MCB Bank (MCB).

“We do not expect any major deletions from main frontier market index, however, we believe that Oil & Gas Development Company (OGDC), can become part of the main index,” Umair Naseer at Topline Securities said.

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

To recall, Pakistan was reclassified to MSCI Frontier Market from Emerging Market in Sep 2021. Pakistani equity market met the requirements for Market Accessibility under the classification framework for Emerging Markets, however it did not meet the standards for Size and Liquidity, which led to a downgrade from Emerging to Frontier Market as per MSCI.

In its Semi-Annual Review in Nov 2021, MSCI assigned Pakistan a weight of 1.25 percent in FM index. It is anticipated Pakistan’s weight to remain more or less same in the upcoming quarterly index review, he added.

Reclassification: MSCI adds three Pakistani securities to Frontier Markets Index

MSCI had started consultation in 2021 on the potential inclusion of the MSCI Pakistan Index to the MSCI Frontier Markets 100 Index and the MSCI Frontier Markets 15 percent Country Capped Index as part of the May 2022 Semi Annual Index Review (SAIR). The results of this consultation will be announced coinciding with the Feb 9, 2022 Quarterly Index Review (QIR).

“We think that the chances are high that Pakistan will be included in MSCI FM 100 and FM 15 percent country capped index which could generate additional flows,” Umair Naseer said.

“However considering, the number of frontier funds and their size has reduced substantially, we don’t expect any major inflows.”

Copyright Business Recorder, 2022