Pakistan’s weight in MSCI EM index may fall to 0.10pc after semi-annual review

The stock market also experienced net foreign outflows of $315m and $339m during 2015 and 2016 respectively.

KARACHI: As MSCI’s semi-annual index review date (13th November) draws closer, a Topline Security report has predicted Pakistan’s weightage in its emerging market (EM) index could fall to 0.10pc based on 31st October free-float market capitalization.

This compares to 0.14pc in June when Pakistan was reincluded into the MSCI Emerging market index from the Frontier market after a gap of 8 years. Since Pakistan’s reinstatement into MSCI’s Emerging market index from June 1st, 2017, KSE-100 index has plunged by 16pc.

The combined market capitalization of 6 constituents which includes HBL, UBL, OGDC, Engo, Lucky Cement and Engro in EM index has fallen by 16pc in comparison to MSCI EM index which has inched upwards by 13pc.

Major reasons for the fall and underperforming of Pakistan Stock exchange (PSX) could be attributed to the political uncertainty and macroeconomic concerns that have plagued the country’s economy since last few months.

Since January, the stock exchange has witnessed foreign outflows of $98m since June compared to selling of $439m from January till now. The stock market also experienced net foreign outflows of $315m and $339m during 2015 and 2016 respectively.

Among the major constituents forming part of Pakistan’s MSCI EM index, Lucky Cement has registered a fall of 40pc in share prices since June 1st and 39pc decrease has been recorded from the same data by HBL stocks.

Lucky Cement share price have been pressurized due to discounts on cement bags and lower retention prices, whereas HBL has been a victim of the $225m penalty imposed on its NY branch by a US regulator, which caused it to book a Rs14.122b loss for July-September quarter of FY 2017-18.

Topline predicted no likely changes to company-wise index composition but mentioned a possibility of Lucky Cement being removed from EM index. If Lucky cement gets dropped after semi-annual review my MSCI, Pakistan’s weight in EM index could fall to 0.08pc, the report said.

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