MSCI adds 3 Pakistani firms to Frontier Markets Index

• "MSCI Pakistan Indexes will be reclassified from EM to FM in one step coinciding with this index review," the statement reads.
• According to details, 3 Pakistani securities will be added to the MSCI FMI at an aggregate weight of 1.25%.
• According to some financial experts, the PSX reclassification in FMI would support companies to regain their share prices.

KARACHI: In line with market expectations, Morgan Stanley Capital International (MSCI) Inc – a leading provider of research-based indexes and analytics globally – has relocated three leading Pakistani stocks; Lucky Cement, Habib Bank (HBL) and Muslim Commercial Bank (MCB), to its MSCI Pak FM standard cap with effect from December 1, 2021.

“As previously announced, the MSCI Pakistan Indexes will be reclassified from Emerging Markets to Frontier Markets in one step coinciding with this index review,” MSCI said in a statement in the early hours on Thursday (according to the Pakistan Standard Time).

With reference to its November 2021 Semi-Annual Index Review for the MSCI Equity Indexes - including the MSCI Frontier Markets, and MSCI Frontier Markets Small Cap Indexes; three Pakistani securities will be added to the MSCI Frontier Markets Index at an aggregate weight of 1.25%.

It is pertinent to mention here that in September, in line with market expectations, the MSCI had announced that it would reclassify the MSCI Pakistan Indexes from its Emerging Market Index (EMI) to Frontier Markets Index (FMI).

In June, the MSCI had proposed that it would downgrade the Pakistan Stock Exchange (PSX) from EMI to FMI. The proposal had come on the back of a continuous drop in the share price of its listed firms for quite a long time.

Earlier, speaking to Geo.tv, Arif Habib Limited Head of Research Tahir Abbas had said: “Although the Frontier Market has shrunk in size since 2017, amid global redemptions in the wake of COVID-19, we believe our weight will gradually go up as markets rebound and attract pre-corona foreign inflows, and the weight of the Bangladesh and Nigeria market is currently frozen.”

The analyst had added that barring Vietnam, the fundamentals of the KSE-100 index are relatively stronger than those of the peer markets (with a higher weight) with valuations at very enticing levels.

Overall dynamics of the benchmark KSE-100 index are comparatively stronger than the peer markets with a higher weight such as Kazakhstan, Kenya, Bangladesh etc.

According to some financial experts, the PSX reclassification in FMI would support companies to regain their share prices.

After the relocation of three Pakistani stocks to FMI, there is only one other Pakistani stock left among EMI namely; Oil and Gas Development Company.

According to MSCI, 14 firms have been added to MSCI Pakistan Index Frontier Markets small-cap indexes; namely:

1. Bank Alfalah (BAFL)
2. Engro Corporation
3. Engro Fertiliser (EFERT)
4. Fauji Fertiliser Company (FFC)
5. Hub Power Company (HUBC)
6. Mari Petroleum (MARI)
7. Millat Tractors (MTL)
8. Pakistan Oilfields Limited (POL)
9. Pakistan Petroleum Limited (PPL)
10. Pakistan State Oil (PSO)
11. Searle Pakistan (SEARL)
12. Systems Limited
13. TRG Pakistan
14. United Bank Limited (UBL)

Meanwhile, three companies have been added to the MSCI Frontier Markets Indexes; which include:

1. HBL
2. Lucky Cement
3. MCB