Pakistan may draw more foreign investment on MSCI boost

ISLAMABAD: Index compiler MSCI’s expected move to add Pakistan to its broader stock indices next year will pay off big for the country as it will bring more foreign portfolio investment and increase trading volume, market regulator said on Thursday.
“It is an encouraging development for Pakistan, as the SECP (Securities and Exchange Commission of Pakistan) has complied with most of the IOSCO’s (The International Organization of Securities Commissions) principles, which will help boost investors confidence and have a positive impact on MSCI’s reclassification of the Pakistan Index from ‘Frontier Markets’ to ‘Emerging Markets’ next year,” Zafar Hijazi told journalists.
“This will bring more foreign portfolio investment and increase volume of the equity market.”
Pakistan remained in the emerging market index during 1994-2007 periods but was then removed in December 2008 due to price floor and was maintained as a standalone country index. In May 2009, Pakistan was shifted from standalone Index to Frontier Market Index.
Hijazi said the IOSCO in the first ever Assessment Committee’s review has mostly lauded the SECP on making significant progress in meeting international regulatory standards.
Pakistan was the first country to volunteer itself for IOSCO’s review assessment.
“There will be also other rounds in December 2015 and in June next year to assess the reforms implementation process of the commission, and we are on the way to abolish the bottlenecks and stay compliant to the principles,” chairman SECP said.
The IOSCO review, published this week, indicates that Pakistan’s regulatory framework has undergone significant improvements in the structure and practice of regulation since 2004, when the IMF and World Bank issued their last Financial Sector Assessment Program (FSAP) evaluation of the country in which Pakistan stayed compliant only to four principals.
Pakistan was declared fully compliant on 13 IOSCO’s principles, broadly compliant on 10, partially compliant on nine while only in case of five principles Pakistan remained non-compliant.
Pakistan has succeeded in complying with about 62 percent of principles due to the efforts by the regulators.
Established in 1983, IOSCO membership regulates more than 95 percent of the world's securities markets in more than 115 jurisdictions; securities regulators in emerging markets account for 75 percent of its ordinary membership.
Hijazi said the 2008 market crash inquiry report has been submitted to the policy board of the SECP, which will meet on Aug 10, 2015, however he did not disclose its findings.