KARACHI: The low foreign inclusion factor remains a major reason for Pakistan’s MSCI Index to witness no major changes in the negotiations, analysts said.
The MSCI has commenced consultations on the potential inclusion of MSCI Pakistan Index to the MSCI Frontier Market (FM) 100 index and MSCI FM 15 per cent Country Capped Index, a report by the Arif Habib Limited showed.
The MSCI in its September 2021 reclassification decision had announced that the results of the consultation will be announced in the upcoming Quarterly Index Review (QIR) scheduled to be held on February 9, 2022, while the same will be applicable from May 22 Semi Annual Index Review (SAIR).
For the MSCI Pakistan Index, there would be no change and the Lucky Cement Limited, Habib Bank Limited and the MCB Bank Limited will continue to remain part of it with Pakistan’s weight of around 1.22 per cent, the report noted.
The low foreign inclusion factor is the major reason, despite fulfilling the total and free-float market cap requirement for the Oil and Gas Development Company (OGDC), Pakistan Petroleum Limited (PPL) and Mari Petroleum to not be part of the MSCI Pakistan Index.
“We can expect foreign inflows to the tune of $75 to $95 million in May 2022, while the active flows could materialise before May 2022. We reiterate that barring Vietnam, the fundamentals of the KSE-100 Index are relatively stronger than those of the peer markets (with a higher weight) with the KSE-100 Index valuations at very enticing levels,” the report noted.
“The overall dynamics of the KSE-100 Index are also comparatively stronger than the peer markets with a higher weight such as Kazakhstan, Kenya, Bangladesh,” it added.
The MSCI in its decision in June 2021, had indicated that the MSCI Pakistan Index would have a total of 23 constituents, and it was also simulated that Pakistan will have a weight of 5.8 per cent in the MSCI FM 100 Index.
However, as per the latest publication of the MSCI Pakistan Investable Market Index (IMI) dated December 2021, the total constituents have declined to 17, which means that some of the constituents are no more eligible for inclusion in the MSCI FM 100 and FM 15 per cent Capped Index.
The report expects that a total of 12 constituents from Pakistan would be added to the MSCI FM 100 Index, including Lucky Cement, Hub Power Company (Hubco), Engro Corporation Limited (Engro) and HBL.
They also included United Bank Limited, MCB Bank, Fauji Fertilizer Company, Systems Limited, Mari Petroleum, Engro Fertilizers Limited and PPL with a cumulative weight of 3.64 per cent in the index.
The highest weighted constituent will be Lucky Cement with a weightage of 0.46 per cent, while the lowest weighted company will be PPL with a weight of 0.22 per cent.
