MSCI Aug 2024 Review: Pakistan Weight May Increase

Staff Report:MSCI is scheduled to announce its Quarterly Index Review (QIR) on Aug 12, 2024, with any changes in the index becoming effective from Sep 02, 2024.

Based on details updated on the MSCI website, in the last review of May 2024, the minimum threshold for free float and total market capitalization for the selection of frontier market stocks was revised upward from US$57 million to US$63 million and from US$114 million to US$126 million, respectively.PMDC and MSCI Forge Partnership for Pink Rock Salt Venture

Any change in the threshold is not known until the results are announced for that particular review, and it is generally updated every quarter. Refer to the side table for more information.

Likely Additions in Aug 2024 Review: We expect the addition of DG Khan Cement (DGKC), Sazgar Engineering (SAZEW), Faysal Bank (FABL), and Fauji Fertilizer Bin Qasim (FFBL) as their free float and market capitalization are above the threshold used for the last review by 6-27%.

There are also chances for the addition of Fauji Cement (FCCL). However, its free float is only 1.4% above the last review threshold.

Any upward revision in the free float or total market threshold by MSCI may result in deviations from our above estimates.

Deletions in Aug 2024 Review: TRG fails to meet the total market cap requirement of US$126 million, as its market cap in the last 10 working days has ranged between US$105-117 million. However, with the help of the buffer rule, this company may still remain part of the index.

Pakistan’s weight is likely to increase by 35-45 basis points, rising to 4.7-4.8% from 4.2-4.3%, after the likely addition of the above scrips and an approximate 9% increase in the market cap of existing constituents.

Inflow Estimation: Theoretically, due to an increase in weight by approximately 35-45 basis points and assuming an AUM size of US$5-10 billion tracking the MSCI FM index, we expect gross inflows of US$20-45 million.