MSCI trims Pakistan’s weight

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KARACHI: Contrary to expectations, Pakistan’s weightage in the global stock market index has been slashed in the semi-annual review conducted by Morgan Stanley Capital International (MSCI), which might result in the withdrawal of some foreign investment from the Pakistan stock market.

Topline Research reported on Wednesday, “After this November 2023 Index Review, Pakistan’s weight in the Index (MSCI Frontier Market) reduced from 3.2% to 2.9.”

The reduction in weight was not seen due to anything wrong with the Pakistan Stock Exchange (PSX), but the available information suggests “the weight of a few other countries, including Vietnam, Romania, and Sri Lanka, have increased in a range of 0.17% to 1.81%.”

“Due to this adjustment, we expect net outflows, but the quantum will be very small,” the research house said in a commentary post MSCI Semi-Annual review results for November 2023.

Arif Habib Limited, however, calculated the weight differently, saying, “Pakistan’s weight in MSCI Frontier Market main Index is expected to be 3.7% as compared to 2.7% in August 2023.”

To recall, the PSX has seen a record-breaking rally in the past one week to 10-days, as its benchmark KSE 100-Index has grown by over 30% in the past one year on early signs of economic recovery and announcement of the election date in recent times.

MSCI has deleted no Pakistani listed company from its Frontier Market Index, nor did it add any new company in the index.

The changes to MSCI Frontier Market index (like change in weightage) will be effective from November 30, 2023. To highlight, Pakistan was reclassified to MSCI Frontier Market from Emerging Market in November 2021 as it did not meet the standards for Size and Liquidity.

However, in the small-cap index, four constituents have been removed, and four new constituents have been added. Accordingly, the small-cap index welcomed four new Pakistani listed companies including Faisal Bank Limited (FABL), Kohat Cement Company (KOHC), Maple Leaf Cement Factory (MLCF), and Shell Pakistan (Shell). On the other hand, the index bid farewell to Agha Steel Industry (AGHA), AGP Limited (AGP), Pak Suzuki Motor Company (PSMC), and Sazgar Engineering Works.

The main Frontier Market Index comprises of 17 constituents, including Oil and Gas Development Company (OGDC), Pakistan Petroleum Limited (PPL), Mari Petroleum Limited (MARI), United Bank Limited (UBL), Lucky Cement (LUCK), MCB Bank (MCB).

The other companies are Engro Corporation (ENGRO), Habib Bank Limited (HBL), The Hub Power Company (HUBC), Fauji Fertiliser Company (FFC), Systems Limited (SYS), Engro Fertiliser (EFERT), Pakistan Oilfield Limited (POL), Millat Tractors, Pakistan State Oil (PSO), Bank Alfalah Limited (BAFL), and TRG Pakistan.

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