MSCI retains Pakistan in emerging market index

KARACHI: Pakistan has kept up its emerging marketing status in the quarterly index review by Morgan Stanley Capital International (MSCI), benefiting from relaxation in market capitalisation rule.

Index provider MSCI announced changes in constituents of its global indices late on Wednesday. There was no change for both standard and small cap indices related to the country, according to latest announcement.

Stocks in standard index include Habib Bank, Oil and Gas Development Company and MCB with Pakistan’s weight in MSCI EM (emerging market) Index at 0.02 percent, while stocks in small cap index include BAFL, NBP, SEARL, MTL, PKGS, PPL, LUCK, ENGRO, UBL, MARI, FFC, INDU, HUBC, POL, EFERT and PSO.

The marketing was expecting no deletions or additions of constituents in MSCI Pakistan Index under MSCI global standard indexes.

“Pakistan has been part of MSCI EM owing to the index continuity rule since May-2019,” said Atif Zafar, chief economist at Topline Research.

“However, we do not expect any developments with respect to the Pakistan’s exclusion from MSCI EM.”

In the last review, the minimum benchmark for EMs was reduced to $1.4 billion of total market capitalisation and $700 million of float market capitalisation.

In the past, MSCI also suggested of invoking the rule.

The index continuity rule would be applied if anyone of the existing three stocks falls below the two-third requirement of full market capitalisation.

All the three constituents from Pakistan – OGDC, MCB and HBL – do not meet the minimum free-float capitalisation criteria of $776 million, though OGDC only meets the full market capitalisation criteria of $1.551 billion.

Of the three constituents, OGDC and MCB meet the MSCI’s buffer rule of two-third of full market capitalisation.

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

MSCI reclassified the country to emerging market index in June 2017 after keeping it on frontier markets for nine years.

Pakistan’s stock market saw robust growth over the years in terms of its market capitalisation, which was around Rs8 trillion on January 30, 2020, but as a result of global downturn due to coronavirus pandemic, it fell to around Rs5.7 trillion as of April 1, 2020.

This has led to uncertainty and pessimism surrounding Pakistan’s national economic indicators,” Pakistan Stock Exchange said in a document.

“The first half of fiscal 2020 showed

some clear signs of a path towards economic recovery, however, considering the existing situation the journey towards sustainable long-term growth is expected to take time.”

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