MSCI Semi-Annual Index Review: Pakistan’s weight expected to increase: Topline

KARACHI: The addition of a few securities to the MSCI Standard Index is expected in the MSCI Semi-Annual Review announcement while a few securities may be moved from MSCI Standard Index to MSCI Small Cap Index.

The MSCI will be releasing the results of the MSCI Semi-Annual Review on November 14, 2023 and the changes to MSCI Frontier Market Index will be effective from December 1, 2023.

With the addition of a few securities to the MSCI Standard Index, the Pakistan weight is also expected to increase, analyst said.

“We think likely increase in Pakistan weight will be positive as some more foreign flows will come to Pakistan,” Muhammad Sohail, leading analyst and CEO of Topline Securities said.

To recall in latest quarterly review on August 2023, as many as 14 Pakistan stocks have been moved from the MSCI Small Cap Index to the MSCI FM Standard Index. Additionally, BAFL had been included in the MSCI FM Standard Index, bringing the total number of stocks in that index to 17.

The scrips in Frontier Market Standard Index includes 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 August 2023 review.

This has resulted in Pakistan’s weight in the FM index increasing from 0.6 percent to2.7 percent in August 2023.

There are total 21 countries in MSCI Frontier Market where top 5 countries includes Vietnam with 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 of 6 months from May-October 2023.

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

However market capitalization Top 5 Frontier Market countries which accounts of 60 percent weight in FM index declined by 1.0 percent while Index is only up by 4.0 percent in the period under review.

“Considering above factors, we anticipate that Pakistan’s weight will further increase in upcoming Semi-Annual index review, given the 21 percent increase in overall market cap and 26 percent increase in the KSE-100 index,” Sohail said.

The addition of a few securities to the MSCI Standard Index cannot be ruled out, he said.

Copyright Business Recorder, 2023