The index provider MSCI has announced that it will include the Pakistan’s equities in its benchmark emerging-market index for the first time since 2008. This will upgrade PSE’s status to an “Emerging market” status and it will be applicable from May 2017.
The classification could bring up to $500 million in foreign investment within a year.
The Pakistan Stock Exchange has shown gradual and constant improvement in economic statistics over the the past several months. The improved security situation has attracted foreign investment to the country.
According to Bloomberg News, the KSE 100-Share Index has already gained 15% this year, making it the best performer in Asia.
The gauge has climbed 4.2% this month, compared with a 0.4% fall in the MSCI Emerging Markets Index
Before the announcement, Mattias Martinsson, the chief investment officer at Tundra Fonder which holds $200 million of Pakistani equities, said, “Pakistan is moving into acceptance: the nation has what it needs, a decently functional state and decent stability.”
Also read: Pakistan’s Post MSCI Reclassification to Bring $500 Million in Foreign Investment
Arthur Kwong, the Hong Kong-based head of Asia-Pacific equities at BNP Paribas Investment Partners said,
Basically people are looking for alternatives, finding markets that are less correlated to the U.S. interest-rate cycle and the China macro slowdown. Pakistan, no doubt, is one of the outstanding spots.
After this announcement, the KSE-100 Share Index surged 2% early today following the overnight announcement. This trend is expected to be maintained as new investors will be interested to invest in Pakistan if there is consistency in government’s economic policies and the security situation in the country.