On May 15th, 2017, MSCI is expected to formally introduce Pakistan into the MSCI Emerging Markets Index.
The indexing firm’s stringent criteria and vetting process has been a contributing factor for why the last upgrade to the Emerging Markets index occurred back in 2014, when Qatar and the UAE were added to the index.
In the relatively rare instances when a country is upgraded to emerging market status, many market participants expect to see rising trading volumes and flows into the country. These developments are often a result of a larger pool of investors looking to gain access to the market following its reclassification.
In some instances, the introduction of additional investors into the market can also positively impact the performance of the country’s stock market.
Since the MSCI announcement; PSX has demonstrated meaningful upticks in investor interest with positive net inflows and rising volumes. Since June 14th last year, PAK has added $24 million in inflows.
Pakistan’s potential large capitalization companies that would likely be part of the list include Oil and Gas Development Company Limited (OGDCL), Habib Bank Limited and MCB Bank Limited.
Mid cap category would be formed by United Bank Limited, moved from large cap in FM to mid cap in the EM, Lucky Cement, Fauji Fertilizer Company Limited, Engro Corporation, Hubco and Pakistan State Oil that was announced by MSCI last year in June, 2016.
Stocks that would form small cap in EM list include:
- National Bank of Pakistan, Indus Motor Company,
- Fatima Fertilizer,
- Kot Addu Power Company,
- Fauji Cement,
- Dawood Hercules Corp,
- Pakistan Oilfields,
- Fauji Fertilizer Bin Qasim,
- Searle Pakistan,
- Maple Leaf Cement,
- Bank Al-Falah,
- Pak Suzuki Motor Co,
- Kohat Cement,
- Nishat Mills,
- Ferozesons Laboratories,
- IGI Insurance,
- Pak Elektron,
- Millat Tractors.
The simulated MSCI Pakistan Index would have a potential weight of 0.13% in Emerging Markets.
MSCI Pakistan Index was removed from MSCI Emerging Markets Index at the end of December 2008 following the deteriorated investability conditions prevailing in the Pakistani equity market. The index was classified as stand‐alone.