After much demand from global investors, MSCI Inc has announced the launch a new index, the MSCI Frontier Markets 100 Index, with ten Pakistani stocks making the list.
The index is highly linked to the broader MSCI Frontier Markets Index, but is composed of just 100 of its largest constituents.
The index has been launched keeping in view significant demand from institutions around the world for a more tradable version of MSCI Frontier Markets Index — especially from those who face various obstacles in replicating broader frontier markets indices, said said Baer Pettit, Managing Director and Head of the MSCI Index Business in a press statement on Tuesday.
MSCI, a leading provider of investment decision tools worldwide, is widely used by top global fund managers to track a stock exchange’s position and make fund allocations accordingly.
As per initial details of the constituents of the index, there will be 10 Pakistan stocks in the Frontier 100 Index, according to KASB Securities analyst Imtiaz Gadar. While detail of the exact weight assigned to Pakistan is not available, it is believed not be different from the 4.4% weight enjoyed by Pakistan in the broader MSCI Frontier Markets Index.
The benefit could be two fold from Pakistan’s vantage point: increased visibility for investors and flow of passive funds due to decent representation, added Gadar.
Given that the index has just been launched, it will take time before it starts getting traction and the funds tracking the index assume meaningful size. Positively however, MSCI has highlighted that leading asset management firm BlackRock has indicated that it will be using the index for a forthcoming ETF.
Based on the broader MSCI Frontier Markets Index, the MSCI Frontier Markets 100 Index is a representative and more easily replicable alternative.
Published in The Express Tribune, April 12th, 2012.