MSCI is set to release its November 2024 Index review on November 6, 2024, with the potential inclusion of four additional companies from the Pakistan Stock Exchange (PSX) into its indices, effective November 26, 2024.
According to a report by Topline Securities, the last review in August 2024 set the minimum thresholds for the selection of frontier market stocks at a free-float market capitalization of $69 million and a total market capitalization of $138 million. Historically, MSCI has increased these thresholds by an average of 10 percent in each review. Topline anticipates a similar increase for the upcoming review, projecting new thresholds of $76 million for free float and $152 million for total market capitalization.
The report identifies four likely additions to the MSCI indices: Fauji Cement (FCCL), Cherat Cement (CHCC), Fauji Fertilizer Bin Qasim (FFBL), and Kohat Cement (KOHC). As of October 31, 2024, the free float market capitalizations of these companies are $101 million, $106 million, $107 million, and $79 million, respectively, all exceeding the anticipated threshold of $77 million.
Additionally, Pioneer Cement (PIOC) and Fatima Fertilizer (FATIMA) have free float market capitalizations of $71.6 million and $72.4 million, respectively. If the threshold is not raised by the expected 10 percent, these companies could also be considered for inclusion.
Regarding potential deletions, TRG and Interloop (ILP) are expected to be retained under the buffer rule, with TRG’s free float market cap now at $70.7 million and Interloop’s at $63 million.
The inclusion of these companies could increase Pakistan’s weight in the MSCI Frontier Markets Index from 4.4-4.6 percent to 5.0-5.2 percent. This increase, along with a 12 percent rise in the market cap of existing constituents, could theoretically lead to gross inflows of $25-30 million, assuming an asset under management (AUM) size of $5 billion tracking the MSCI FM index. However, as most frontier funds are actively managed, the actual inflows may vary..
