Emerging market status

The MSCI has announced its Pakistan Index would be reclassified to Emerging Markets status

The MSCI, an international firm that provides investment decision support, has announced that its Pakistan Index would be reclassified to Emerging Markets status, coinciding with the May 2017 Semi-Annual Index Review. This has prompted a strong bullish sentiment at the country’s stock exchange, resulting in the KSE-100 Index going over 1,000 points on June 15 and another 192 the next day. The decision means Pakistan would officially be part of the emerging markets next year, a little over eight years after it lost this status due to the 2008 financial crisis that led to a price floor and suspension of trading at the stock exchange for more than three months. The situation in the country back then saw a general election being held with the PPP reclaiming the throne and General (retd) Musharraf leaving office. Political upheaval in the country, along with the global financial crisis, meant the stock market bore the burden and the result was a lack of trust in the stock market and the country’s economy. The eight-year journey has since seen Pakistan’s first smooth democratic transition of power.



That, together with all the efforts regulators and the economy have made, has meant that trust among investors has improved and scepticism over the stock exchange’s ability to absorb external shocks has decreased, resulting in a change of position at the MSCI. The benchmark-100 index has come a long way since 2008, adding billions in market capitalisation amid improving volumes and liquidity. While there have been issues of brokers’ default, change is well on its way. Finance Minister Ishaq Dar expects $475 million of inflows after acquiring the emerging market status, a bit on the higher side of the range analysts are giving. What is important is that governments should always consider such developments as part of a journey, and not the final destination. The good work needs to continue and requires the input and effort of all stakeholders. Pakistan has come a long way and is now reaping benefits of a somewhat stable political landscape. One hopes such developments are used to benefit the wider public rather than just a handful of investors.

Published in The Express Tribune, June 17^th, 2016.

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