MSCI is scheduled to announce its November 2024 Index review on November 06, 2024, to add four more PSX companies to its indices, with an effective date of November 26, 2024.
Based on details updated on the MSCI website, in the last review of August 2024, the minimum threshold of free float and total market cap for the selection of frontier market stocks was US$69 million and US$138 million, respectively, Topline Securities said in a report.
To note, in the last 2 reviews, MSCI has increased its threshold requirement by an average of 10 percent in each review, see the accompanied table for details.
Any change in this threshold is not known until the results are announced for that particular review and it is generally updated every quarter.
Topline has assumed a 10 percent increase in threshold requirement from US$ 69 million to US$ 76 million for free float and US$ 152 million for full market cap.
Likely Additions in November 2024 Review
In November 2024, the report expects the likely addition of 4 stocks namely Fauji Cement (FCCL), Cherat Cement (CHCC), Fauji Fertilizer Bin Qasim (FFBL), and Kohat Cement (KOHC). The free float market cap of these stocks as of October 31, 2024, is US$ 101 million, US$ 106 million, US$ 107 million, and US$ 79 million, three of these are much higher than the anticipated free float threshold of US$ 77 million.
There are also two other companies with free float exceeding US$ 69 million (previous criteria), i.e. Pioneer Cement (PIOC) US$ 71.6 million, and Fatima Fertilizer (FATIMA) US$ 72.4 million. If the free float threshold requirement is not enhanced by the report’s assumed 10 percent, the addition of any of these can not be ruled out.
Deletions in November 2024 Review
As TRG was retained in the last review under the buffer rule, the free float market cap of TRG now improved to US$ 70.7 million. Interloop (ILP) free float is also lower at US$ 63 million. Both of the stocks would be retained under the buffer rule.
Pakistan’s Weight to Increase by 50-70bps
Pakistan’s weight is likely to increase to 5.0-5.2 percent from earlier 4.4-4.6 percent after the likely addition of the above 4 scrips and increase in market cap of existing constituents by ~12 percent.
Inflow estimation Theoretically, due to an increase in weight by ~50-70bps and assuming an AUM size of US$ 5 billion tracking the MSCI FM index, we expect gross inflows of US$ 25-30 million. However, since most of the frontier funds are active, so materialization of inflows may vary.
