Pakistan has retained its emerging market status in Morgan Stanley Capital International (MSCI) Emerging Market (EM) Index after avoiding a downgrade to Frontier Market (FM) Index during its May 2019 Semi-Annual Review.
All three of Pakistan’s large and mid-cap stocks including Oil and Gas Development Company Limited (OGDCL), Muslim Commercial Bank (MCB) and Habib Bank Limited (HBL) continued to remain part of the MSCI Global Standard Indexes.
However, MSCI has removed three Pakistani stocks from the MSCI Global Small Cap Index. These include Fauji Cement (FFC), Fauji Fertilizer Bin Qasim Limited (FBL) and International Steels (ISL).
According to market analysts, the deletions are negligible. The changes will come into effect on May 28, 2019, the Semi-Annual Review announced.
There were speculations in the market regarding a potential downgrade to MSCI FM Index, whose current weight in MSCI EM was estimated at 0.03 percent, down by 7-8 Basis Points (bps) since inclusion in June 2017.
However, MSCI’s ‘Buffer Rule’ of 2/3rd of Free Float and Full Market Cap of $494 million and $988 million, respectively, has kept Pakistan in the EM Index for now.
After the 3 deletions the MSCI small-cap index constituents are as follows:
- Bank Alfalah
- DG Khan Cement
- Engro Corporation
- Engro Fertilizer
- Fauji Fertilizer Company
- Hub Power Company
- Indus Motor
- Kot Addu Power Company Limited
- Lucky Cement
- Millat Tractors
- National Bank of Pakistan
- Nishat Mills
- Packages Ltd
- Pakistan Oilfields Limited
- Pakistan State Oil
- Sui Northern Gas
- Thal Ltd
- The Searle
- United Bank Limited
Some market analysts were of the view that Pakistan might avoid the downgrade as the procedure usually involves public consultation, followed by an announcement and then the final exclusion occurs one year after the announcement.