Pakistan's equity market expecting $25-$30 million inflows following MSCI review on Nov 6

Pakistan's equity market is anticipating a gross inflow of $25-$30 million following the MSCI review on November 6, 2024.

Significant changes are expected for Pakistan's representation in the MSCI Frontier Markets (FM) Index, with changes effective from November 26, 2024.

In the last review in August 2024, the minimum thresholds for the selection of frontier market stocks were $69 million for free float market cap and $138 million for total market cap.

Over the last two reviews, MSCI has increased these thresholds by an average of 10% per review. Analysts expect this trend to continue, with the free float threshold potentially increasing to $76 million and the full market cap threshold to $152 million.

For the November 2024 review, four stocks are expected to be added to the index: Fauji Cement (FCCL), Cherat Cement (CHCC), Fauji Fertilizer Bin Qasim (FFBL), and Kohat Cement (KOHC). As of October 31, 2024, these companies have free float market caps of $101 million, $106 million, $107 million, and $79 million, respectively, all above the anticipated threshold of $77 million.

Additionally, Pioneer Cement (PIOC) and Fatima Fertilizer (FATIMA) have free float market caps of $71.6 million and $72.4 million, respectively. If the threshold is not raised by the expected 10%, these companies could also be added to the index.

Regarding deletions, TRG and Interloop (ILP) are likely to be retained under the buffer rule, despite their free float market caps being $70.7 million and $63 million, respectively.

Pakistan's weight in the MSCI Frontier Markets Index is expected to increase to 5.0-5.2% from the current 4.4-4.6%, following the likely addition of the new stocks and a roughly 12% increase in the market cap of existing constituents.

The estimated inflows are based on the increased weight of Pakistan's representation in the index. With an assumed AUM size of $5 billion tracking the MSCI FM index, analysts expect gross inflows of $25-30 million. However, the actual inflows may vary as most frontier funds are actively managed.