MSCI likely to add 4 new Pakistani stocks to its Indexes

November 05, 2024 (MLN): Morgan Stanley Capital International (MSCI) is likely to add Fauji Cement (FCCL), Cherat Cement (CHCC), Fauji Fertilizer Bin Qasim (FFBL), and Kohat Cement (KOHC) to its Frontier Market Index, according to a report by Topline Securities.

Based on details updated on the MSCI website, in last review of August 2024, the minimum threshold of free float and total market cap for the selection of frontier market stocks was $69 million and $138m, respectively.

To note, in last two reviews, the MSCI has increased its threshold requirement by average 10% in each review.

Topline Securities said it has assumed a 10% increase in threshold requirement from $69m to $76m for free float and $152m for full market cap.

The free float market cap of the abovementioned stocks as of October 31, 2024 is $101m, $106m, $107m, and $79m, three of these are much higher than anticipated free float threshold of $77m.

There are also two other companies with free float exceeding $69m (previous criteria), i.e. Pioneer Cement (PIOC) $71.6m, and Fatima Fertilizer (FATIMA) $72.4m. If free float threshold requirement is not enhanced by the assumed 10%, the addition of any of these can not be ruled out.

It is worth mentioning that MSCI is scheduled to announce its Quarterly Index Review (QIR) on November 06, 2024 and any changes in the index will be effective as of the close of November 25, 2024.

Pakistan currently has 22 stocks in the MSCI Frontier Market (FM) Index.

Moreover, Topline said Pakistan weight is likely to increase to 5.0-5.2% from earlier 4.4-4.6% after likely addition of above 4 scrips and increase in market cap of existing constituents by ~12%.

Theoretically, due to increase in weight by around 50-70bps and assuming AUM size of $5 billion tracking MSCI FM index, "we expect gross inflows of $25-30m. However, since most of the frontier funds are active, so materialization of inflows may vary," it said.

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