Three Pakistani companies added to MSCI's Frontier Market Index

MSCI has announced its May index review, wherein three new companies from Pakistan are added to Frontier Market Index namely DG Khan Cement (DGKC), Maple Leaf Cement (MLCF) and Fauji Cement (FCCL).

Following the addition, the total number of constituents in MSCI Frontier Index has risen to 26. These changes will be effective from May 30.

Morgan Stanley Capital International (MSCI) is an investment research firm known for its benchmark indexes, including the MSCI Emerging Market Index and the MSCI Frontier Markets Index.

The firm's indexes provide stock indexes, portfolio risk and performance analytics, and governance tools to institutional investors and hedge funds.

Based on details updated on the MSCI website, in the review, the minimum threshold of free float and total market cap for the selection of frontier market stocks was $78 million and $155 million, respectively.

In its last review in February, the threshold was $72 million and $145 million, respectively.

Interloop (ILP), Searle Limited (SEARL), and Abbott Laboratories (ABOT) are retained in the index despite not meeting the free float threshold of $78 million on the basis of buffer rule.

In a note, Topline Securities commented that in past, TRG was retained despite not meeting threshold and was subsequently removed from the index in upcoming reviews.

Pakistan's weight

Topline estimates that Pakistan's weight in MSCI Frontier Market Index is close to 6-6.5%.

The addition of three cement companies constitutes weight of 26 basis points. Assuming $2 billion to $3 billion funds tracking the Frontier Market Index globally, the inflows in these companies are estimated around $5 million and $8 million.

Small Cap Index

MSCI has also added four stocks in Small Cap Index, namely Archroma Pakistan (ARPL), At-Tahur (PREMA), Engro Polymer (EPCL) and Pak Reinsurance (PAKRI). One stock (DGKC) was moved to the main index, while two — AGP Pharma (AGP) and Agritech limited (AGL) — were deleted.