MSCI Removes MCB From Frontier Market Index

Investment research firm and stock markets index provider, Morgan Stanley Capital International (MSCI) has removed MCB Bank from the Frontier Markets (FM) Pakistan Index.

In its latest Semi-Annual Review (SAIR), MSCI has announced changes in the constituents of its global indices, which will be effective from November 30, 2022, according to AHL research.

Only two stocks including Lucky Cement (LUCK) and Oil & Gas Development Company (OGDC) have retained their position in the MSCI FM Pakistan Index whereas MCB has been transferred to the MSCI FM Pakistan Small cap Index.

Pakistan’s weight in the MSCI FM Index is at ~0.66 percent.

As per the MSCI Market classification framework for November 2022, the criteria for frontier markets includes full market capitalization at $883 million while free-float market capitalization of $73 million along with ATVR of 2.5 percent is required.

The MSCI also announced other changes in the MSCI Small cap index whereby no changes have been made apart from the MCB addition. Small index stocks include Hub Power Company (HUBC), ENGRO, Systems Limited (SYS), Fauji Fertilizer Company (FFC), United Bank Limited (UBL), MCB, Millat Tractors Limited (MTL), The Resource Group (TRG), Mari Petroleum (MARI), Engro Fertilizers Limited (EFERT), Habib Bank Limited (HBL), Pakistan Oilfields Limited (POL), Pakistan State Oil (PSO), Pakistan Petroleum Limited (PPL), Bank Alfalah Limited (BAFL), Engro Polymer and Chemicals Limited (EPCL), Indus Motor Company Limited (INDU), and Searle Pakistan Limited (SEARL).

Overall, the review is expected to be neutral for the market.

To recall, Pakistan was reclassified into MSCI FM Index from Emerging Markets (EM) last year in November 2021. Pakistan had met the requirements for market accessibility under the classification framework for EM however it no longer met the standards for size and liquidity which led to the reclassification.

Initially, the MSCI reclassified three stocks from Pakistan, namely HBL, LUCK, and MCB to the main index. However, in May 2022, the MSCI added OGDC to the main FM index and removed HBL from the main index.