Business

Pakistan upgraded to emerging markets status

PSX surges over 2% as Pakistan upgraded to emerging markets status

Kazim Alam June 14, 2016

Karachi Stock Exchange. PHOTO: AFP

In a positive development, MSCI said its Pakistan Index will be reclassified to the Emerging Markets status, coinciding with the May 2017 Semi-Annual Index Review.

MSCI is a leading provider of international investment decision support tools. Its decision is to upgrade the country from the Frontier Markets status is expected to generate inflows of global portfolio investment amounting to $475 million by the middle of 2017, according to EFG Hermes, an Egypt-based investment bank.

Pakistan's economic output rising at healthy pace

Global institutional investors use different MSCI indices – such as frontier, emerging, China and US markets – to create balanced portfolios to generate maximum returns while keeping in view their overall risk appetite.

MSCI communicates its conclusions, based on discussions with the international investment community, on a list of markets under review every June. MSCI announced last year that Pakistan was on its list for possible reclassification in view of improvements in transparency and liquidity.

Pakistan was part of the MSCI EM Index between 1994 and 2008. However, the temporary closure of the Pakistan Stock Exchange in 2008 led MSCI to remove it from the index and classify it as a “standalone country index”. MSCI made Pakistan a part of the Frontier Markets Index in May 2009 and it has remained as such since then.

'Pakistan to receive up to $500 million post MSCI re-classification'

Although the actual reclassification of the index will follow next year, global investors tend to start factoring in the reclassification ahead of the actual change, which prompts massive inflows of global funds in the case of a favourable decision.

Pakistan’s weight in MSCI Frontier Markets Index is about 9% with as many as 16 companies. Its weight in the MSCI Emerging Markets Index will be smaller in percentage terms though. But the reclassification will bring in bigger foreign inflows in absolute terms, as emerging markets attract far more funds than frontier markets.

Assets of more than $9.5 trillion are estimated to be benchmarked to MSCI indices worldwide. According to Next Capital CEO Najam Ali, most frontier market funds will continue their investment in Pakistan even after its reclassification as an emerging market as long as the improving macro theme remains intact.

According to Bloomberg News, the benchmark index of the Pakistan Stock Exchange has gained already 15% this year, making it the best performer in Asia. “The gauge has climbed 4.2% this month, compared with a 0.4% fall in the MSCI Emerging Markets Index,” it said on Tuesday.

COMMENTS (15)

raider | 8 years ago | Reply @Humza: international newspapers are saying that money is being stolen from Pakistan, and this had happed in past, low prices of oil is playing part in some wellbeing of this country if there exist any, Pakistan moved from worst to bad due to dead low prices of oil otherwise FDI decreased and Pakistan securing lowest GDP in south ASIA, now Pakistan will be able to get new installment of debt by this admiration. Thanks

Humza | 8 years ago | Reply @Anum: The ruling class has not upgraded Pakistan's ranking but independent Western agencies and if you were to read Western newspapers, Pakistan is considered one of the few stable, developing Muslim states which also gets praise as a democracy. Moodys, Standard and Poors, Finches, Western newspapers etc are not owned by Pakistanis but they are all saying Pak's ecomony and situation is improving which is why the nation is being upgraded to emerging market status. This seems to upset you but please most people in Pakistan. @NKAli: Show me daylight robbery because in Ramadan you need to have proof before accusing anyone. Maybe the Western observers seeing improvement in Pakistan is not to your liking.

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Crossfire | 8 years ago | Reply Paid PMLN social media team commenting here.

Haris | 8 years ago | Reply People giving credit to PMLN lol .... This Nation will remain the same for next 100 years atleast !!

Xnain | 8 years ago | Reply @Anum: "fake emerging economy bubble" lol education fails to instill common sense in people, so true.

Anum | 8 years ago | Reply Ruling class wanna fool people with this fake emerging economy bubble.... but, if you see the ground reality, even Bangladesh is economically way ahead of Pakistan, Bangladesh's growth rate, exports and forex reserves are much higher than Pakistan's growth rate, exports and forex reserves

Hafeez | 8 years ago | Reply Pakistan is making great progress on economic fronts but some hopeless people won't admit it. Thanks to the PMLN government(for vision & policies), thanks to Military (for supporting government) and above all thanks to the business community and common people (for their trust and faith in this country despite all the odds).

Sawaiz | 8 years ago | Reply @roadkashehzada Why Ik?? For stoping economy and imbalancing it at the time of Dharna?? Youthiya!!

M. Saleem Akhtar | 8 years ago | Reply Why should we not a little open-hearted to accept the success of PMLN's Govt. No doubt credit goes to all stakeholders yet leader is always given the due credit. So, Without being biased i'd say PMLN is doing somehow better than others economically not ethically.

hey | 8 years ago | Reply landmark achievement of pmln.. credit should be given where due.. this should take our economy to the next level.

NKAli | 8 years ago | Reply @Ali: @Fast: You two gentlemen stil don't get it, do you. There is daylight robbery going on in front of you, they are being named globally, their properties are being identified and you still make them heroes? You need to do some introspection and start maturing. Salams

goldconsumer | 8 years ago | Reply Without any doubt the last government of PPP has been a disaster for Pakistan both in terms of economy and security.

Fast | 8 years ago | Reply Another feather in the PMLN cap.

Roadkashehzada | 8 years ago | Reply Most of our doomsday analyst won't know what emerging market means. Anyway, thanks to Raheel sharif and imran khan.

Ali | 8 years ago | Reply Pakistan's economy is heading in the right direction. The economy is much more stable than previous years and hopefully our GDP growth will also pick up from this year onwards. But only if the PML(N) government is allowed to complete its tenure. Unfortunately this may be a scary thought for some people!

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