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November 9, 2019

Pakistan maintains emerging market status


November 9, 2019

KARACHI: Pakistan continued to maintain its emerging market status in the semi-annual index review for the Morgan Stanley Capital International (MSCI) equity indexes as all the three key blue chips complied with the free-float standards to qualify as the index constituents, analysts said on Friday.

Oil and Gas Development Company (OGDC), MCB and HBL continued to remain part of the MSCI Global Standard Indexes due to the continuity rule being applied to maintain a minimum of three stocks in the MSCI Global Standards Index, an analyst said.

MSCI announced the results of the November semi-annual index review for the MSCI Equity Indexes. All changes will be implemented as of the close of November 26.

No securities were added in the review. However, three securities, namely DG Khan Cement, Kot Addu Power Company, and Thal Limited were deleted from MSCI Global Small Cap Indexes.

In May, the country also saved its skin from a potential downgrade to frontier from emerging markets despite odds.

All three constituents of Pakistan – HBL, OGDC and MCB – managed to secure the status of the standard index owing to buffer rule that allows 66 percent of free float and full market capitalisation to maintain status in the EM index.

MSCI reclassified the country to emerging market index in June 2017 after keeping it on frontier markets for nine years and that was expected to attract $300 to 500 million foreign inflows from the funds tracking the index.

It was expected that the country might be excluded from the MSCI EM index if its blue-chip stocks continued to derogate from the required free-float standards.

Stocks market emerged as the worst performing investment avenue among all its peers during 2018 as economic and political challenges caused equities to turn up negative returns of five percent during the period.

The market, however, showed recovery in the recent past as the inflationary outlook is hinting towards a shift in direction to soft monetary policy.

Last month, the KSE-100 index gained 2,125 points (or 7 percent). “The month was a tale of two halves, wherein the first half market gained 6.2 percent on account of secondary market bond yield adjustment which witnessed a downward revision by 86 basis points from 12.18 percent to 11.32 percent (10 year),” Topline Research said in a report. “Later, in second half, a conclusion of FATF (Financial Action Task Force) review in which Pakistan remained in grey list till February 2020 and a call of Azadi March by opposition parties created uncertainties weighing in on the investors’ decision. As a result, the index remained flat.”

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