MSCI Frontier Market Index unchanged for Pakistan, small-cap index reshuffled with four new entrants

KARACHI: Pakistan’s stocks will retain their current representation in the MSCI main Frontier Market Index after a semi-annual review by global index provider, but four companies will be added and four removed from the small-cap index.

The changes to the MSCI Frontier Market Index and the MSCI Frontier Market Small Cap Index will take effect on November 30, MSCI said in a statement.

The four companies added to the small-cap index are Agha Steel Industries, AGP, Pak Suzuki Motor Co, and Sazgar Engineering Works, while the four deleted are Faysal Bank, Kohat Cement, Maple Leaf Cement and Shell Pakistan.

The total number of constituents in the small-cap index remains the same at 41.

The main Frontier Market Index consists of 17 constituents, including Oil and Gas Development Co., Pakistan Petroleum Ltd., Mari Petroleum Co., United Bank Ltd., Lucky Cement Ltd., MCB Bank Ltd., Engro Corp., Habib Bank Ltd., Hub Power Co., Fauji Fertilizer Co., Systems Ltd., Engro Fertilizers Ltd., Pakistan Oilfields Ltd., Millat Tractors Ltd., Pakistan State Oil Co., Bank Alfalah Ltd., and The Resource Group Pakistan Ltd.

“After this November 2023 Index Review, Pakistan’s weight in the index reduced from 3.2 percent to 2.9 percent,” brokerage Topline Securities said in a note.

“As per the available information, the weight of a few other countries including Vietnam, Romania and Srilanka have been increased in a range of 0.17 percent to 1.81 percent.”

The adjustment may result in net outflows from Pakistan, but the amount will be very small, Topline added.

Pakistan was reclassified from the MSCI Emerging Markets Index to the MSCI Frontier Markets Index in September 2021, after failing to meet the size and liquidity criteria for the former.

The MSCI had said then that while the Pakistani equity market meets the requirements for market accessibility under the classification framework for Emerging Markets, it no longer meets the standards for size and liquidity.

Pakistan had rejoined the MSCI Emerging Markets Index in June 2017, after being part of the MSCI Frontier Markets Index for nine years.

The MSCI indexes are widely used by global investors to allocate funds to different markets and asset classes. Changes in the index composition can affect the inflows and outflows of foreign portfolio investment.