Home / Finance & Market / MSCI upgrade to result in about $400-500m in inflows into Pakistan stock market

MSCI upgrade to result in about $400-500m in inflows into Pakistan stock market

Published on 27th June, Edition 26- 2016

 

Investor outlook remains positive as Pakistan is now in the same rank of rising economies like India, Malaysia and Indonesia
Interview with Mr. Asif Baig Mirza – CEO, ABM Securities (Pvt) Ltd

ABM Securities (Pvt) Limited is one of the leading Brokerage House of Pakistan Stock Exchange Limited. Licensed by the Securities and Exchange Commission of Pakistan (SECP) and managed by the team of Mr. Asif Baig Mirza, Chief Executive Officer, this brokerage house actively deals in sale and purchase of shares and government securities.

In an exclusive interview with Pakistan and Gulf Economist (PAGE), Mr. Asif Baig Mirza shared his views about Morgan Stanley Capital International (MSCI), a leading provider of global equity indexes, which has upgraded Pakistan to emerging markets status. MSCI’s research-based indexes and analytics have helped the world’s leading investors build and manage better portfolios for over forty years.

He said MSCI is a leading provider of international investment decision support tools. Assets of more than $9.5 trillion are estimated to be benchmarked to MSCI indices worldwide, he added.

According to him, the MSCI has upgraded Pakistan to the emerging markets status. This decision of the MSCI will have positive impact on Foreign Direct Investment (FDI) in the country and also help achieve the objectives of mid-term Microfinance Framework.He said Index compiler MSCI’s expected move to add Pakistan to its broader stock indices in May 2017 and set to pay off big for the country as it will bring more foreign portfolio investment and increase trading volume. This will definitely help boost investors’ confidence and have a positive impact on MSCI’s reclassification of the Pakistan Index from Frontier Markets to Emerging Markets.

It may be noted that Pakistan remained in the emerging market index during 1994-2007 periods but was then removed in December 2008 due to price floor and was maintained as a standalone country index. In May 2009, Pakistan was shifted from standalone Index to Frontier Market Index.

Mr. Asif Baig Mirza estimate the MSCI upgrade will result in about $400-500 million in inflows into Pakistan’s stock market by passive tracker funds alone. He said investor outlook remains positive as Pakistan is now in the same league as other rising economies in the region such as India, Malaysia and Indonesia. Investors are looking very seriously at strong eight to nine companies with good fundamentals, he said, adding: “Stocks from four sectors were under consideration for the index ─ these include banking, cement, energy, and fertilizer. Chemicals and pharmaceutical stocks will not be included in the MSCI index, despite performing well recently.”

 

Mr. Asif Baig Mirza further said Pakistan’s inclusion in the MSCI Emerging Markets benchmark is undoubtedly the beginning of a new chapter in the history of the country. “We all had been anxiously waiting for this moment since years — tremendous hopes were connected to the outcome of the MSCI announcement. A positive decision from MSCI was likely to have an impact on the quantum and quality of investment inflow in Pakistan which could give a major boost to the market as well as the economy,” he said.

To a query, Mr. Asif Baig Mirza said Pakistan, as a developing economy, needs a capital market that enjoys the confidence of domestic and foreign investors and is able to mobilize capital for economic growth.

He said the inclusion of Pakistan in emerging markets index reflected the fact that the country was achieving better growth in terms of liquidity and market size. He said in developing countries MSCI Emerging Markets was the most widely-used index by investors and expressed the hope the emerging market status would further strengthen Pakistan’s capital market. This would generate more job opportunities and income for the common man, which ultimately would lead to the sustainable economic development of the country, he added.

However, Mr. Asif Baig Mirza emphasized for taking necessary steps to strengthen our market. There must be increase in liquidity, free float size and easy entry and exit in the market to prove it as a matured marker, he said.

While foreign reserves are increasing, there are expectations of stability in exchange rate and stability in oil prices, the country’s stock market is set to grow with investment by fund managers in time ahead, Mr. Baig said.

Currently, about 15 companies on the Pakistan Stock Exchange have a market capitalization of more than $1 billion. “More companies will qualify for MSCI EM with better liquidity and free float.”

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