Three cement firms join MSCI frontier index
Morgan Stanley Capital International (MSCI) has included three Pakistani companies in its Frontier Market (FM) Index and four more in its FM Small Cap Index as part of the May 2025 index review.
MSCI, a prominent global provider of investment decision support tools, announced the results of its May 2025 semi-annual index review, bringing major changes for Pakistan's listed companies in both the MSCI Frontier Markets Standard and Small Cap indices. The changes, effective after the close of trading on May 30, 2025, highlight increased representation of Pakistan in the global investment landscape, particularly in the cement sector.
According to Arif Habib Limited (AHL), Pakistan's weight in the MSCI FM Index is now estimated at around 6.1%, reflecting growing investor interest and improving market performance.
As per the review, three cement companies - Fauji Cement, Maple Leaf Cement and DG Khan Cement - have been added to the MSCI FM Standard Pakistan Index. With no deletions reported, the total number of Pakistani constituents in the standard index now rises to 26. This includes major blue-chip names such as UBL, Lucky Cement, OGDC, Engro, MCB Bank, HBL, FFC and now the three cement firms.
Topline Securities, in its research note, estimated that the combined weight of the three added stocks was 26 basis points (bps) in the FM index. Given that global funds tracking the MSCI's Frontier Index amount to around $2-3 billion, Pakistan could attract an estimated $5-8 million in passive inflows through these additions alone.
Interestingly, DG Khan Cement's promotion comes at the cost of its removal from the MSCI Small Cap Index, highlighting its upgraded market status.
Meanwhile, the small-cap index saw the addition of four companies – Archroma Pakistan, At-Tahur Limited, Engro Polymer & Chemicals and Pakistan Reinsurance Company. On the flip side, AGP Limited and Agritech Limited have been deleted from the MSCI Small Cap Index.
The MSCI Small Cap Index now contains 410 constituents globally, with 67 stocks from Pakistan, making up roughly 16% of the total index and holding a 10.7% weight.
Topline noted that companies like Interloop, Searle and Abbott Laboratories were retained in the index despite not meeting the minimum free-float threshold ($78 million in the latest review), citing the MSCI's buffer rule as the likely reason. This rule allows companies slightly below the threshold to remain in the index to minimise excessive churn.
The inclusion criteria for this review were stricter compared to the previous one in February 2025, with the minimum free-float market cap raised to $78 million from $72 million, and the total market cap requirement up to $155 million from $145 million.
Maaz Azam, Head of Research at Optimus Capital, told The Express Tribune that while the latest MSCI index review brings positive news, the true success for Pakistan will lie in re-entering the emerging markets (EM) category.
The MSCI index changes are widely watched by institutional investors and passive fund managers around the world. The increase in Pakistan's representation may not only lead to short-term capital inflows but also signal growing confidence in the country's economic and market fundamentals.