In MSCI review Pak weight falls on Morocco inclusion – KASB Research
By: Farrukh Khan,
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KASB Securities Limited
In its Nov-13 semi-annual review, MSCI has included Morocco in the MSCI Frontier Market Index. As a result, Pakistan’s weight in the index will fall to 3.94% (effective 27th Nov), from 4.07% currently; however, the distribution of all 12 Pakistani stocks included in MSCI FM remains unchanged. Our calculations suggest Pak’s weight in MSCI FM to go above 5.55% in May-14 after upgrade of UAE and Qatar to MSCI EM index. For the MSCI Small Cap Index, Bank Al-Habib and SSGC have been included whilst Shell Pakistan has been removed. Pakistan’s weightage in the MSCI FM Small Cap Index has increased from 4.46% now to 4.82%. Frontier markets have continued to see strong inflows; in YTD 2013 net inflows are US$1.8bn, with US$600mn in the last 14 weeks. These strong flows have led to re-rating in a number of frontier markets; in CY13YTD, MSCI Pak return has been 32%, MSCI FM return has been 17%, whilst MSCI EM has been -4%YTD.
MSCI Semi‐annual Review: Morocco inclusion dilutes Pakistan weightage In its Nov‐13 review announced yesterday, as per its plan, Morocco has been included in the MSCI Frontier Market (FM) Index from the MSCI Emerging Market (EM) Index. The inclusion of Morocco with a weightage of 4.84% has led to a decline in Pakistan weightage, which will fall to 3.94% effective 27th Nov from 4.07% now. However, all 12 Pakistani stocks remain in the MSCI FM index. In terms of the MSCI Small Cap Index, Pakistan sees two additions and one deletion as Bank Al‐Habib and SSGC entered and Shell Pakistan is removed. Pakistan’s weightage in the MSCI FM Small Cap Index has increased from 4.46% now to 4.82% effective 27‐Nov‐13.
Weightage to improve significantly on UAE and Qatar upgrade in May‐14 With the upgrade of UAE and Qatar to MSCI EM in the next semi‐annual review scheduled for May‐14, Pakistan’s weight in the MSCI FM would improve significantly. Based on the current weights of UAE and Qatar, we calculate that Pakistan’s weight would increase to 5.55% in May‐14. Given global frontier market funds have Assets under management (AUM’s) of US$8.3bn currently; this could result in significant inflows for Pakistan’s market.
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