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PSX loses weight in MSCI review

Updated November 15, 2017

KARACHI: MSCI anno­u­nced early morning on Tuesday the results of the November 2017 Semi Annual Index Review for the MSCI Equity Indexes, which on top of the market meltdown, exacerbated the investors’ anxiety.

Within the MSCI Global Standard Indexes, MSCI removed Engro Corporation from the MSCI Pakistan Index and decided against making any additions. The changes would be effective from Nov 30.

While Engro has been demoted to MSCI Global Small Cap Indexes, three other stocks Ferozsons Laboratories, Pak Suzuki Motors and Shell Pakistan have been removed from the Small Cap Index.

Stock brokerage firms widely covered the event with most analysts feverishly calculating the impact of change on the MSCI Pakistan index. Most came up with the view that after the removal of Engro Corp, weight of Pakistan MSCI Emerging Markets Index would decline to 0.08pc from 0.14pc. The Pakistan weight in the small cap has been revised to 0.94pc. Engro Corp has been expelled as its total market capitalisation fell below $1.5 billion and free-float market capitalisation sank below $750 million.

Meanwhile, five companies have maintained their position in the MSCI EM Index. Those include one large cap scrip (OGDC) and four mid-caps namely HBL, UBL, MCB, and Lucky Cement.

MSCI small cap index constituents are as follows: Engro Corp, BAFL, EFERT, FCCL, FFBL, FFC, Honda Atlas, Hubco, IGIIL, Indus Motor, ISL, DG Khan Cement, Kot Addu Power, MLCF, Millat Tractor, National Bank , National Refinery, NML, PKGS, PAEL, POL, Pakistan State Oil, The Searle, Sui Northern Gas Pipeline and Thal Ltd.

The MSCI announcement this year has brought evil tidings to the local stock market. Although much hype was created and the excited investors looked forward to the reclassification of Pakistan from Frontier Markets (FM) to EM on May 15 effective date of June 1), the tables were turned when instead of expected huge inflows, the local bourse witnessed incessant foreign selling.

Ever since the reclassification, Pakistan equity market has fallen by 18.5pc, representing erosion of 7,016 points, three-quarters of which is due to plunge in stock prices of those included in MSCI EM large, mid and small market capitalisation.

Published in Dawn, November 15th, 2017