In a much-anticipated event, the Morgan Stanley Capital International (MSCI) is gearing up to conduct its semi-annual review of global stock markets, with results slated for release on November 14, 2023. The recent robust rally at the Pakistan Stock Exchange (PSX) has sparked optimism, indicating a favourable outcome in the review and paving the way for foreign investors to infuse fresh liquidity into the bourse.
Topline Research provided insights in a commentary, shedding light on the six-month review period from May to October 2023, with the MSCI’s price cut-off set during any of the last 10 business days of October 2023.
“Since May-Oct 2023, Pakistan’s market capitalisation of stocks in the MSCI FM Standard Index has increased by 15%, and the overall market capitalisation of PSX has surged by 21% in US dollar terms. The KSE 100 index has also witnessed a substantial 26% upswing during this period.”
Contrastingly, the market capitalisation of the top five Frontier Market countries, constituting 60% of the MSCI FM index weight, experienced a 1% decline, with the index itself only marking a 4% increase during the review period.
“Considering the above factors, we anticipate that Pakistan’s weight will further increase in the upcoming semi-annual index review, given the 21% boost in overall market capitalisation and the 26% surge in the index.”
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The prospect of adding a few securities to the MSCI Standard Index is on the horizon, and the likelihood of some securities moving from the MSCI Standard Index to the MSCI Small Cap Index is also acknowledged.
“We believe the likely increase in Pakistan’s weight will be positive, attracting more foreign flows to Pakistan.”
MSCI is poised to unveil the results of the semi-annual review on November 14, 2023 (Tuesday), with changes to the MSCI Frontier Market index taking effect from December 01, 2023.
Reflecting on the August 2023 quarterly review, a notable reshuffling occurred. Fourteen Pakistani stocks transitioned from the MSCI Small Cap Index to the MSCI FM Standard Index. Additionally, BAFL found a spot in the MSCI FM Standard Index, elevating the total number of stocks in that index to 17.
MSCI also recalibrated the MSCI Small Cap Index by incorporating 27 stocks, bringing the total constituents to 41 in the August 2023 review. Consequently, Pakistan’s weight in the FM index experienced a substantial increase, jumping from 0.6% to 2.7% in August 2023.
With 21 countries in the MSCI Frontier Market, the top five countries include Vietnam with a share of 29.9%, followed by Romania at 9.8%, Iceland at 9.2%, Kazakhstan at 7.2%, and Slovenia at 4.8%.
The scrips in the Frontier Market Standard Index feature key players such as Oil and Gas Development Company (OGDC), Pakistan Petroleum Limited (PPL), Mari Petroleum (Mari), United Bank Limited (UBL), Lucky Cement (Lucky), and MCB Bank (MCB).
Other notable companies include Engro Corporation (Engro), Habib Bank Limited (HBL), The Hub Power Company (Hubco), Fauji Fertiliser Company (FFC), Systems Limited (Sys), Engro Fertilizer (Efert), Pakistan Oilfields Limited (POL), Millat Tractor (MTL), Pakistan State Oil (PSO), Bank Alfalah Limited (Bafl), and TRG Pakistan (Trg).
Published in The Express Tribune, November 10th, 2023.
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