On Monday, Morgan Stanley Capital International (MSCI) Index provider reinstated Pakistan’s status to the MSCI Emerging Markets. As soon as the news came in, Pakistan Stock Exchange (PSX) went bullish creating hubbub in the stock market.
Changes expected with the upgradation
Tuesday’s open market displayed 400 points to reach 52,700 level poured by the benchmark KSE-100. On Monday, it also set a record of 52,500 points before the expected time MSCI announced.
The upgrade in the MSCI Pakistan Index is a part of the Index’s semiannual market reclassification. On Tuesday, a press release stated:
“The MSCI Pakistan Indexes will fully converge with the MSCI Provisional Pakistan Indexes, effective June 1, 2017. There will be no additions to and ten deletions from the MSCI Pakistan Index. There will be eleven additions to and six deletions from the MSCI Pakistan Small Cap Index”
According to the MSCI classification, 57 securities have been added, while 28 securities have been removed from the All-Country World Index. Changes were also made to the emerging markets index. Indian Oil Corp Ltd of India, Novolipetsk Steel of Russia and Bancolombia SA of Colombia have been the biggest changes made.
According to JS Global Research, the upgrade in status will hopefully increase global portfolio investment in Pakistan ranging $200-$500 million.
Numerous worldwide institutional financiers utilize distinctive MSCI indexes; for instance, emerging, frontier, China and US markets – to make adjusted portfolios to create highest returns.
History of Pakistan’s index status
Between the period 1994 and 2008, Pakistan shared a portion in the MSCI Emerging Market Index. However, in 2008, MSCI removed it from the index due to the temporary closing of Karachi Stock Exchange. MSCI classified Pakistan as a ‘standalone country index’. Later in 2009, it added Pakistan to the Frontier Markets Index.
On 14th June last year, MSCI upgraded Pakistan’s status to Emerging Market from Frontier Market.
The new upgrades would be put into effect on 31st May, after the market closes. MSCI makes quarterly adjustments to its indexes, which it claims to be worth $9.5 trillion in assets.