Pakistan is in the Morgan Stanley Capital International (MSCI) index for the emerging market since 2017, but now it looks like the country might lose its status of being an emerging market, according to a Bloomberg report.
The privately held finance and media company which is popular for its futuristic research work, Bloomberg has bad news for Pakistanis. The global media outlet reports that Pakistan’s status in the MSCI Inc.’s emerging-market indexes is in big trouble as the country’s stocks have fallen below the market-size threshold.
Pakistan became the part of the MSCI index in June 2017, however, since then the nation has lost around $44 billion of equity value. This is considered as the worst sell-off in a decade.
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Moreover, Habib Bank Ltd., which is one of the three stocks in the MSCI’s Pakistan scale, is now standing at a market capitalization below $1.6 billion. It must be noted that the MSCI requires at least three stocks to place a country above that level to maintain its emerging-market status.
Mohammad Al Hajj, an equities strategist at EFG-Herme while elaborating Pakistan’s status to Bloomberg stated that there is a “50 percent probability that Pakistan will be put on review in June” for a downgrade and “if it happens, it will be the fastest upgrade or downgrade” in the history.
This means that Pakistan is not necessarily supposed to be affected by the demotion. Because of the global investors do not take their decisions of investment on the basis of a single characteristic like MSCI index. As per an email statement by the index provider;
“MSCI may decide to keep the market for some time within the same status, while keeping three constituents using the index continuity rule. Secondly, the final decision to reclassify could be made following a public consultation. When an index contains less than three securities, then the next largest securities by free float-adjusted market capitalization may be added to the Standard Index.”
Shamoon Tariq, deputy chief investment officer at Stockholm-based Tundra Fonder AB expressed his serious concerns over the current situation of Pakistan’s economy. As he stated;
“We are disappointed to see Pakistan faces a risk of the downgrade as we traveled on global roadshows for Pakistan’s upgrade not long ago. The new government has been indifferent towards the capital market that needs support.”
