Pakistan has been progressing well and achieving milestones. Which is great news. But we have more interesting news to break. Pakistan Stock Exchange had already been making headlines in 2021 for making progress. Morgan Stanley Capital International has decided to make Pakistan part of its frontier market 100 index, which will attract foreign investments.
According to the MSCI Quarterly Index Review, MSCI had been in consultation with the global investors to include Pakistan in the FM 100 index. The decision will be implemented from May 2022 onwards. Earlier in 2021, Pakistan Stock Exchange was downgraded from the Emerging Market Index (EMI) due to sharing prices falling below the required level of EMI. In 2021, three companies Lucky Cement, Habib Bank Limited, and MCB Bank from PSX were made part of FM Index. Other than these, 17 companies from PSX independently came in the FM Index. Tahir Abbas, Head of Research Arif Habib Limited said, “These companies include Lucky Cement, Hub Power, Engro Corporation, Habib Bank, United Bank, MCB Bank, Fauji Fertiliser, Systems Limited, Mari Petroleum, Engro Fertilisers and Pakistan Petroleum with a cumulative weight of 3.64% in the index,”
Currently, foreign investors are managing funds from $2-2.5 billion. Tahir Abbas, Head of Research Arif Habib Limited said, “We can expect foreign inflows in the range of $75-95 million in May 2022, while the active flows could materialize before May 2022. Pakistan’s weight is expected at 3.64% in the MSCI FM 100 index. As per our workings, a total of 12 constituents from Pakistan are expected to be added to the MSCI FM 100 index.” He said that the KSE-100 index is comparably stronger than its peer markets such as Kazakhstan, Kenya, and Bangladesh.
Topline Research analyst Umair Naseer said, “We do not expect any major deletions from the main frontier market index (from the three securities in quarterly index review), however, we believe that Oil and Gas Development Company can become part of the main index. We anticipate Pakistan’s weight to remain more or less the same in the upcoming quarterly index review. The highest weighted constituent will be Lucky Cement (weightage of 0.46%), while the lowest weighted company will be Pakistan Petroleum Limited (weight: 0.22%).”
MSCI released a statement, “Following feedback received from market participants, Pakistan will become eligible for inclusion in the MSCI Frontier Markets 100 and the MSCI Frontier Markets 15 % Country Capped Indexes as part of the May 2022 Semi-Annual Index Review (SAIR).”
The MSCI said that while the Pakistani market meets the requirements under the classification framework for Emerging Markets. Pakistan continues to struggle to attract foreign investment, this would help in attracting the much-needed investment.
Fahad Rauf, Head of Research at Ismail Iqbal Securities Limited said, “This can attract some/limited foreign inflows. However, the market would continue to be driven by local investors.”