KSE-100 index at all-time high as Pakistan upgraded to emerging markets status

Published: June 15, 2016
Benchmark KSE-100 index surges over 2% on Wednesday. PHOTO: ONLINE

Benchmark KSE-100 index surges over 2% on Wednesday. PHOTO: ONLINE

KARACHI: KSE-100 Share Index surged 2.58% on Wednesday following an overnight announcement by MSCI about the country’s upgrade from frontier to emerging market status.

The KSE 100-Share Index hovered around 38,415.63 points at 12:33pm, up 2.4% from the start of trading.

In the early hours of Wednesday, global index provider MSCI announced that its Pakistan Index will be reclassified to the Emerging Markets status.

“The jovial mood following this re-rating event is expected to reflect in market performance today,” according to Intermarket Securities, a brokerage house.

According to Bloomberg News, the KSE 100-Share Index has already gained 15% this year, making it the best performer in Asia.

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 upgraded to emerging markets status

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.

Pakistan’s economic output rising at healthy pace

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.

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Reader Comments (9)

  • Humza
    Jun 15, 2016 - 10:52AM

    This news will really upset those who hate Nawaz Sharif and PML N. The world is viewing Pakistan’s economy favorably under the current government in just three years while PTI is desperate to pull the rug out of the government before Nawaz can get CPEC started!Recommend

  • abood
    Jun 15, 2016 - 11:13AM

    Does that hury your dharna plan pti.Recommend

  • Munib
    Jun 15, 2016 - 12:00PM

    PTI wasted Golden opportunity to deliver in KPK and now after 3 years of noise they are desperate to not allow Nawaz gov to complete its term as its becoming more clear PMLN is going to win 2018 elections as well.

    Same is true with PPP and JI and now every looser is joining the Opposition bandwagon.

    Entry of Tahir qadri is part of same Script written by Establishment supporters.

    Establishment is annoyed over PMLN not following its line on AFG, USA, INDIA as PMLn knows the old “strategic depth” plan has died its own death and Pak badly cornered. PML is not willing to be too pro-active on Foreign policy, to please GHQ while being seen negatively at international level, and doesn’t want to share burden of the failure of Strategic Depth doctrine.Recommend

  • Faisal
    Jun 15, 2016 - 12:30PM
  • Jun 15, 2016 - 12:52PM

    With falling oil prices Pakistan economy is doing better. Otherwise our government real growth rate is just 3.1 % as calculated by some independent economists. Recommend

  • Salam
    Jun 16, 2016 - 12:15AM

    I have around $250,000 USD invested in Pakistan Index and, so far, this year has been a roaring success. Perfect time to invest in Pakistan.
    My advice to fellow Pakistani investors: invest your savings in indexes, not stocks. Its far more safer. If you don’t invest, inflation alone will wipe out your savings in a few decades.Recommend

  • Zaheer Ali
    Jun 16, 2016 - 12:28AM

    Credit goes to PMLn government. Keep up the good work!Recommend

  • Maria
    Jun 16, 2016 - 3:39AM

    @Shahid Akram: Facts are facts and this is news reflecting how people outside Pak think. Try to do your best to rain on the parade but the fact is that Noon League has done more to improve Pakistan than Musharraf could do in 10 years or Zardari could do in 5 years. They haven’t even finished their term in power. Is that why Tahirul Qadri came back to upset things?Recommend

  • abood
    Jun 16, 2016 - 5:49PM

    @shahid akram.we dont need independent economists surveys.have check around you things are better now compared to the last 10 years.so lets accept it and do more to help our economy.Recommend

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