Pakistan maintains weight in MSCI EM index

Lloyd Doyle
May 16, 2018

Morgan Stanley Capital International (MSCI) slightly raised Pakistan's weight in its flagship index to 0.080 percent in its semiannual review from 0.079 percent in November past year, which analysts termed positive with a caution that China's inclusion might divert some foreign money.

Also, Taiwan was not the only market affected by a cut after MSCI added 234 Chinese yuan-denominated A shares to its indexes, she said, pointing to South Korea and India, whose weightings in the MSCI Emerging Markets Index were cut by 0.35 and 0.14 percentage points, respectively.

"Consequently, we estimate Pakistan's weight in MSCI EM Index to slightly fall after partial inclusion of China A shares", stated Topline Securities.

"Nevertheless, MSCI is influential, and CNBC says that J.P. Morgan expects "$6.6 billion in passive inflows to likely migrate to MSCI China companies in the near term", and "active flows...amounting up to $40 billion of flows into Chinese securities".

Equity analysts anticipated negative impact of the removal on the shares.

Moreover, three companies including IGI Holding Ltd, National Refinery Ltd and Pak Electron Ltd were excluded from MSCI small cap. MSCI EM small cap index now constitutes of 22 stocks from Pakistan, down from 25 in November and 27 in May 2017.

MSCI announced early Tuesday morning Taipei time that it will lower Taiwan's weighting in the Emerging Markets Index by 0.21 percentage points to 11.13 percent and the country's weighting in the All-Country Asia ex-Japan Index by 0.25 percentage points to 12.84 percent. Jacky Wong writes in the Wall Street Journal (paywall): "One of the reasons MSCI held back from admitting China-listed stocks to its indexes for years was companies' penchant for suspending their shares from trading when hit by bad news".

MSCI have revealed the 234 mainland Chinese stocks - or A-shares - that they will be including in their indices from June, ahead of what is expected to be a major boost to global equities as foreign investors gain greater access to China's markets. The second phase of the entry will take place in Sep 2018.

Other reports by Iphone Fresh

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