AKD Securities Limited – AKD Daily (May 13, 2022)

Karachi, May 13, 2022 (PPI-OT): MSCI Review: Much ado about nothing!

Morgan Stanley Capital International (MSCI) announced results of its May’22 Semi-Annual Index Review (SAIR) earlier today. The index manager made 11 additions and 3 deletions from the MSCI Frontier Markets Index and the changes will be effective as of 31st May.

From the vantage of local equities, the index manager announced addition of Oil and Gas Development Company (OGDC) and downgraded Habib Bank Limited (HBL) from the constituent list of MSCI Frontier Market Index. We expect Pakistan’s weight in the revised index to be in the neighbourhood of 1% in MSCI FM Index.

As for MSCI Small Cap Index, Engro Polymer Chemicals (EPCL), Habib Bank (HBL) and Indus Motors Company Limited (INDU) have been added to the index. While the revisions in MSCI FM 100 index and MSCI FM 15% country capped index have not been announced yet.

Elsewhere, MSCI has increased Vietnam’s weight the most up by 3.5pp to 32.5% after having six stocks upgraded from the small cap index. Morocco has been adjusted to 9.5% (down by 0.7%), followed by Bahrain 8.8% (trimmed by 0.5%). Oman lost the most in the FM universe down by 1.0% to be 2.2% after its biggest representative, Bank Muscat was decreased from 40% to 25%.

Market will remain choppy going forward as a host of economic challenges weigh in on the investor sentiments. Some respite may be provided if the fuel prices are unfrozen in the country which will help the government in its parleys with IMF. However, the downside of the same will be spiralling inflation which will likely cross the 15% in the coming months. We advise investors to remain cautious in the market.

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