Investment research firm and stock markets index provider, Morgan Stanley Capital International (MSCI), is expected to announce the results of the consultation on the potential induction of the MSCI Pakistan Index to the Frontier Markets (FM) 100 Index and Frontier Markets 15% Country Capped Index.

According to the “Market Strategy” report released by Arif Habib Limited (AHL), the ineffective timeline for Pakistan’s induction is on the day of the May 2022 Semi-Annual Index Review (SAIR).

The report highlights that as per the MSCI FM 100 Index methodology, the eligibility criteria for inclusion of any security requires it to:

i. not have a limited investibility factor

ii. have above 10 percent Annualized Traded Value Ratio (ATVR)

iii. has started trading at least two months prior to the index review.

Against this backdrop, AHL expects Lucky Cement (LUCK), HUBCO (HUBC), Engro (ENGRO), Habib Bank Limited (HBL), United Bank Limited (UBL), Muslim Commercial Bank (MCB), Fauji Fertilizer Company (FFC), System Limited (SYS), Mari Petroleum (MARI), Engro Fertilizers Limited (EFERT), and Pakistan Petroleum Limited (PPL) to be added to the MSCI FM 100 Index.

It is noteworthy that the existing constituents of Pakistan’s equity market in the MSCI FM Index include Lucky Cement (LUCK), Habib Bank (HBL), and MCB Bank (MCB). The AHL report does not observe any significant removals from the main frontier market index but estimates that the Oil & Gas Development Company (OGDC) might be added to the index.

On the flip side, the effective date for inclusion is on the day of May 2022 MSCI SAIR. However, the research lab forecasts the MSCI FM 100 Index companies to come under the limelight after the February 2022 Quarterly Index Review. Interestingly, if Pakistan does end up getting listed on the FM 100 Index and the FM 15% Country Capped Index, the AHL report predicts the local equities’ market to generate additional inflows to the tune of $75-$95 million in May 2022 alone.

To recall, the MSCI had announced in its September 2021 reclassification decision that it had started consultation on the possible inclusion of the MSCI Pakistan Index to the MSCI Frontier Markets 100 Index and MSCI Frontier Market 15% Country Capped Index. It is noteworthy that Pakistan was downgraded from Emerging Markets (EM) to Frontier Markets after the local bourse failed to meet the benchmarks for Size and Liquidity, despite fulfilling conditions for Market Accessibility under the EM framework.

Consequently, the MSCI accorded Pakistan a weight of around 1.22 percent on the FM Index in November 2021.

Source: Pro Pakistani