LAHORE: Pakistan Stock Exchange (PSX) continues to show signs of extraordinary growth since its reclassification in Morgan Stanley Composite Index (MSCI) on Wednesday. On Thursday, PSX shows rise of 265.32 points since the start of the day already.
PSX jumped over 1,000 points as it prepares for massive inflows due to its e-classification. It is notable that Pakistan has been ‘re-classified’ to ‘emerging markets’ in the MSCI. It had already been part of ‘emerging markets’ from 1994 to 2008, when it was downgraded to ‘frontier markets’ after the regulators froze the market for three months. Now Pakistan has been re-classified to ‘emerging markets’ which has come as pleasant news not only for the investors but also for the general population.
Pakistan’s market has already made a reputation of outperforming its regional companions and for being resilient to drastic changes in the international market. Pakistan expects massive inflows with different analysts estimating different amounts of total inflows. JPMorgan Chase estimated inflows of about $220 million, EFG Hermes Holding SAE expects $475 million, Topline Securities says $600 million and KASB Securities is a little too optimistic with estimates $700-$800 million. However, Daily Times reached experts on the matter including Financial Analyst Gohar Rasool and renowned Economist Muhammad Aslam and they are of the opinion that the net inflows expected in the next year would amount to $300-$450 million.
Answering a question about the effect of this re-classification on the general market conditions of Pakistan, Gohar said that this is primarily related to foreign investments. “When UAE and Qatar were classified to emerging markets in 2014, their markets witnessed around 40 per cent rise, but after the actual implementation, around 10-12 per cent was reversed. We are expecting similar trends for Pakistan,” he added.
Aslam talked about the economic dynamics and said, “this move will not improve the Balance of Payments deficit or any other underlying economic scenario but this will put Pakistan on a bigger podium and introduce Pakistan to a greater number of investors. That will allow businesses to raise finance easier and will have an indirect positive effect. But directly this will lead to increase in foreign investment inflows”.
A research analyst Sanakhawan Hussain said, “MSCI is a tool for exposure to international markets. Pakistan’s reclassification to ‘emerging markets’ means that MSCI considers Pakistan’s market to be more credible and trustworthy for international investors”. He added that liquidity and security of investments are important criteria for MSCI, and this classification means that “MSCI considers Pakistan to be more credible market than Vietnam and Bangladesh who have a higher GDP per capita than Pakistan but are still classified in ‘Frontier market’ index”.
Talking to the Daily Times, GCC Finance Manager Daniyal Baqir Ali said, “It’s a positive indicator for Pakistan economy, investors are gaining confidence, I would call it as a first drop of rain which will prove to be a very favourable indicator in the years to come and will have a very healthy impact on currency and economy reserves depending on further positives steps being continued in shape of economic corridor, democratic stability and improvement in security situation, the time is not far away when we can see Pakistan as one of the developed nation in Asia”.
