November 15, 2023 – In its latest update on the November 2023 Index Review, MSCI has announced that there will be no changes in the constituents for Pakistan in the main Frontier Market Index.
However, the small-cap index will see four constituents removed and four new additions. The adjustments to the MSCI Frontier Market Index are set to take effect from November 30, 2023.
The primary Frontier Market Index for Pakistan currently includes 17 constituents, featuring prominent companies such as OGDC, PPL, MARI, UBL, LUCK, MCB, ENGRO, HBL, HUBC, FFC, SYS, EFERT, POL, MTL, PSO, BAFL, and TRG.
In contrast, the small-cap index will experience alterations with the addition of AGHA, AGP, PSMC, and SAZEW, while FABL, KOHC, MLCF, and SHELL have been removed. Despite these changes, the total number of constituents in the small-cap index remains constant at 41.
Following the completion of the November 2023 Index Review, Pakistan’s weight in the MSCI Index has been adjusted, decreasing from 3.2 percent to 2.9 percent. Meanwhile, other countries, including Vietnam, Romania, and Sri Lanka, have witnessed an increase in their weight within the index, ranging from 0.17 percent to 1.81 percent.
It’s noteworthy that Pakistan was reclassified from an Emerging Market to a Frontier Market by MSCI in November 2021 due to non-compliance with the Size and Liquidity standards. This reclassification had significant implications for the country’s standing in the global investment landscape.
Analysts at Topline Securities Limited anticipate net outflows as a result of this adjustment, albeit at a relatively small scale. The impact on the market is expected to be limited, reflecting the maturity and stability of the Frontier Market.
This move by MSCI underscores the importance of adhering to international market standards for countries aiming to maintain or elevate their market classifications. The adjustments made in the indices reflect the ever-evolving nature of global financial markets and the continuous efforts by index providers to ensure accuracy and relevance.
Market participants will be closely monitoring the repercussions of these changes, particularly in terms of investor sentiment and fund flows. As Pakistan navigates its position in the Frontier Market, continued adherence to market regulations and standards will be crucial for sustaining and attracting international investment.
