The MSCI announced earlier today the inclusion of three Pakistani companies into the MSCI Small Frontier Markets Small Cap Index.
MSCI is a leading provider of international investment decision support tools. International institutional investors use different MSCI indices — such as frontier, emerging, China and US markets – to create balanced portfolios aimed at generating maximum returns while keeping in view their overall risk appetite.
In its latest semi-annual index review for equity indices, MSCI added Byco Petroleum, Searle Pakistan and Ferozesons Laboratories into its MSCI Small Frontier Markets Small Cap Index. The review did not result in the removal of any Pakistani company from the index. The change will take effect from December 1.
However, the review failed to trigger a positive sentiment on the Karachi Stock Exchange (KSE), although the inclusion of three Pakistani companies should ideally bring more foreign portfolio investment and increased volumes to the country’s equity market.
Perhaps the reason for a muted market response was the fact that MSCI did not announce any Pakistan-related deletion/addition in the MSCI Frontier Markets Index, which is considered more important than the MSCI Small Frontier Markets Small Cap Index. MSCI Emerging Market Index is tracked by global funds worth about $1.7 trillion, according to Bloomberg.
The benchmark equity index has remained largely flat since the start of the fiscal year. According to BMA Capital, the stock market is expected to remain volatile in the short term mainly because of the volatility in the global markets and continued outflow of funds from the KSE. Foreign selling has caused an outflow of $243 million from the stock market in the last 11 months, official statistics show.
“We recommend investors to keep exposure limited to stocks with strong earnings growth and attractive dividend yields,” BMA Capital said.
In its preceding review of the index in May, MSCI had added two Pakistani companies into the MSCI Frontier Markets (FM) Index. It had also announced that it would consider Pakistan for a possible reclassification from Frontier Markets into Emerging Markets in its next review.