Pakistan has an image of a turbulent nation, which has been plagued with militancy and political violence. But the dynamics of this country seem to be changing and they are changing for the best. In the past two years the micro-economic conditions of the country seem to have improved a lot and the political outlook also seems to be much more stable. The law and order situation also seems to be improving.
The Morgan Stanley Capital International (MSCI) stated on June 2015 that they were looking for a potential reclassification of the MSCI Pakistan Index in the Emerging Markets from the current classification of the review of 2016 Annual Market Classification. This categorization is very useful for the economy of Pakistan and it can really boost flow of the market.
Pakistan stock exchange is launching a final effort to create a respectable reputation so that the number of potential investors can be increased. Pakistan Stock Exchange dropped from the MSCI emerging markets index in the year 2008.
Do you know: The major Karachi Stock Exchange has merged with smaller bourses in Islamabad and Lahore to form a consolidated exchange with new rules and understanding. (Source: The Fiscal times)
The board chairman Muneer Kamal said that he is confident that Pakistan will be restored to the index. Pakistan will be making it’s case to MSCI on March the 3rd.
When Karachi Stock Exchange was closed in late 2008, Pakistan was classified as a high-risk frontier and was excluded from the emerging markets index. It was closed so that the investors can be prevented from withdrawing.
The new categorization of Pakistan Stock Exchange will help in returning Pakistan to proper index because according to Bloomberg the MSCI Emerging Market Index is tracked by the global funds which is worth $1.7 trillion.
The Chief Investment Strategist of Morgan Stanley pointed out during one of his lectures at the Agha Khan University, that the rise of Pakistan was just a matter of time. The rise will be because of favorable demographics and lower P/E of the stocks which are performing better when it comes to the returns, they are much higher than the markets of other developing countries.
The exchange has applied for the inclusion of the past two years and it has managed to gain review status. In the year 2015 the benchmark of Karachi Stock Exchange rose 2 percent. This year it has managed to shed 5.8 % and it managed to pull down most of the other markets by concern over China’s slowdown in economics and the global growth.
MSCI index questions the whole matter by this: What guarantee is there that the Karachi Stock Exchange will not shut down again, the same way it shut down in year 2008? According to Mr. Kamal, the answer to this important question is that the power which rested with the board of the stock exchange does not exist anymore. Even if the people in the board want to shut down the exchange, they will not be able to do so.
The new status of Pakistan stock exchange can really help Pakistan in enhancing the economy. According to the Purchasing Power Parity, Pakistan has the 26th largest economy and it is the sixth largest populous country with 54 % of it’s population under the age of 24 years. Pakistan has a lot of potential and the new status of the Pakistan Stock Exchange can really help the country in utilizing it’s potential.
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