PSX keeps up emerging market status

KARACHI: Pakistan kept up its emerging market status in the quarterly index review for the Morgan Stanley Capital International (MSCI) equity indexes as the country’s stock exchange continued to yield positive yields to investors despite economic malaise shock waves.

MSCI retained the country’s three key blue chips as the index’s constituents, in the review later on Wednesday. Analyst Atif Zafar at Topline Research said there were no changes in emerging market and small cap index.

“Three constituents namely Oil and Gas Development (OGDC), MCB Bank and Habib Bank (HBL) remained in the main index,” Zafar said.

“There were no changes in the MSCI Pakistan Index under the MSCI Global Standard Indexes and no changes in the MSCI Pakistan Index under MSCI Global Small Cap Index.” All changes will be made as of the close of Feb 28, 2020.

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

Currently, MSCI Global Small Cap Index includes 16 constituents from Pakistan. “We estimate that Pakistan’s weight is likely to remain around the 0.035 percent mark,” Zafar added.

In May last year, 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.

However, it showed resilience last year. The KSE 100-share index recorded an increase of 10 percent in 2019 in rupee terms. In US$ terms, the benchmark index closed the year two percent lower. Market capitalisation closed the year at Rs7.8 trillion ($50.4 billion) compared to Rs7.6 trillion ($55.4 billion) as of 2018-end.