Inside Financial Markets

MSCI doubles Pakistan weight to 8.4pc

msciMSCI doubles Pakistan weight to 8.4pc

KARACHI: The MSCI Inc, a leading provider of investment decision support tools worldwide, announced “changes to the methodology for the MSCI Frontier Market (MSCI FM) 100 index,” by virtue of which, the weight of Pakistan in the index would surge to 8.4pc, twice the current weightage.

The proposed changes suggest that the weight of two largest countries, Kuwait and Nigeria would be scaled down to 40pc from 51.3pc. The new methodology also proposes more stringent free float adjusted market capitalisation criteria. One new stock, Lucky Cement from Pakistan would be added to the proposed index.

The brokers and investors at the KSE are jubilant over the massive increase of weight in the MSCI FM, for the Geneva-based MSCI index is widely followed by the foreign fund managers for allocation of investable sum in capital markets.

“The Pakistan market has outperformed all its peers in the FM in the last 3-4 years,” says Khurram Schehzad, head of Research at Lakson Investments.

Foreign investors had flocked back to the country’s equity markets, regardless of the economic malaise in the previous years, he said and added that at a time when the macro indicators were on the mend, the decision to double country’s weightage is likely to boost foreign funds’ confidence in Pakistan market.

It is interesting to recall that a pale of gloom had decended on the KSE when the international rating agencies had relegated the KSE from “Emerging markets (EM)” to the “frontier markets” in 2009 as a punishment for closing the exit door of the market for 105 days during the global stock crisis of 2008.

Admitted latter as an act of folly, the KSE regulators had continued to persuade the MSCI to let the local market back in EM segment, but without success.

On hindsight, most brokers and stock strategists at the KSE believe that the ‘punishment’ turned out to be a blessing in disguise.

“While competing countries in the FM are comparatively small and under-developed, which allows Pakistan to capture the spotlight, the country would have been lost in the dark in the EM as it would have to reckon with developed peers such as China, India and others,” said one market expert.

He however, admitted that the foreign funds investing in EM are of enormous size, compared to those in the FM.

Sanie Khan

Sanie Khan holds a deep knowledge of the financial markets in Pakistan. Based in Karachi, he has over 20 years of hands-on management experience in financial technologies and managing operations in the financial sector. He was the General Manager at the Pakistan Stock Exchange (PSX) for 17 years. He along-with senior members of Exchange

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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)