MSCI reclassification scraps three companies from MSCI – EM Pakistan Index

Morgan Stanley Capital International (MSCI) has reviewed Pakistan Stock Market and clipped the weight after deleting three companies and lowering one company to small cap index.

Morgan Stanley Capital International announced the results of the November 2017 Semi-Annual Index Review for the MSCI Equity Indexes. Within the MSCI Global Standard Indexes, MSCI has removed Engro Corporation (ENGRO) from the MSCI Pakistan Index; while there have been no additions. All changes will be implemented form the close of Nov 30, 2017.

ENGRO has been demoted to MSCI Global Small Cap Indexes, while Ferozsons Laboratories (FEROZ), Pak Suzuki Motors (PSMC) & Shell Pakistan (SHEL) have been removed.

As per calculations of all the analysts at brokerage houses, Pakistan’s weight in the MSCI Emerging Markets Index would drop to 0.08% after the removal of ENGRO from earlier weight of 0.14%.

Now 5 stocks (large & midcap) remain part of the standard MSCI EM Index; Oil & Gas Development Company (OGDC), Habib Bank (HBL), United Bank (UBL), Lucky Cement (LUCK), and MCB Bank (MCB).

Amongst five MSCI EM stocks, highest weight is that of OGDC (based on free-float market cap), followed by HBL, MCB, UBL, and LUCK.

According to analyst from Topline Securities to sum it all up, this review has not been good for Pakistan where one major stock, ENGRO has been demoted, while from the initial inclusion of 33 stocks in the MSCI Pak Investible Market Index (IMI), three stocks have been removed, leaving behind 30.

To recall, MSCI announced reclassification of Pakistan Market from Frontier Markets (FM) to EM on May 15, 2017 (effective date of June 1, 2017). However, since reclassification, Pakistan Market has fallen by 16% while MSCI EM (Asia) Index is up 12%.