ISLAMABAD: Asia’s best-performing stock market this year could be in for an additional boost if MSCI Inc. includes Pakistan in its emerging-market index for the first time since 2008.
The index provider, added frontier-market Pakistan to its list for possible reclassification last year, citing improvements in transparency and liquidity, said a report appeared in the Bloomberg.
The report said Prime Minister Nawaz Sharif is seeking to boost economic growth to its fastest pace in more than a decade after achieving stability through an International Monetary Fund loan programme that averted an external payments crisis in 2013.
The nation also plans to end an energy crisis in two years with the help of $46 billion of planned Chinese investment.
The Karachi Stock Exchange KSE100 Index has gained 15 percent this year, making it the best performer in Asia.
The gauge has climbed 4.2 percent this month, compared with a 0.4 percent fall in the MSCI Emerging Markets Index.
EFG Hermes said last month an upgrade could lure around $475 million of inflows by mid-2017. Pakistan has a “70 percent chance” of being promoted, according to Tundra Fonder, a fund manager specializing in frontier markets.
The country’s benchmark index rallied the most in five weeks before MSCI’s decision due late Tuesday in New York.
“Pakistan is moving into acceptance: the nation has what it needs, a decently functional state and decent stability,” said Mattias Martinsson, the Stockholm-based chief investment officer at Tundra Fonder, which holds $200 million of Pakistani equities.
“We have a pretty fair chance,” said Farid Ahmed Khan, the Karachi-based chief executive officer at ABL Asset Management Co.
Pakistan was downgraded to frontier status in December 2008, four months after the Karachi Stock Exchange imposed a rule that caused near total paralysis of market activity for more than three months.
MSCI’s Frontier Markets Index currently features 16 Pakistani companies that make up about 9 percent of the gauge.
“Pakistan’s market has been doing so well as valuations are some of the lowest in the region,” said Arthur Kwong, the Hong Kong-based head of Asia-Pacific equities at BNP Paribas Investment Partners, which oversees about 552 billion euros ($623 billion).
“Basically people are looking for alternatives, finding markets that are less correlated to the U.S. interest-rate cycle and the China macro slowdown. Pakistan, no doubt, is one of the outstanding spots,” the report said.
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