KARACHI: Two out of three money-managers polled on Tuesday evening were optimistic that Pakistan would be able to make to the MSCI Emerging Market Index. The announcement is expected at 2am on June 15 (5pm Eastern Day Light Saving Time).

The `individual’ investors who were major buyers of $2.14m worth stocks on Tuesday that saw the KSE-100 index race past the 37,500 mark, adding a massive 538 points (1.45pc) evidently thought the same. Many of the risk averse institutional investors, however, preferred to watch from the sidelines.

Analysts at KASB Securities observed that their survey of 15 money-managers with $4bn equity fund under management underscored the key reasons for a favourabe decision as Pakistan compliance on quantitative criteria improved institutional framework, and impressive improvement in the country’s economic fundamentals (Economic reforms programme under IMF, impact of oil prices, growth outlook, CPEC and robust corporate earnings growth).

Key reasons highlighted for potential unfavorable decision include: Pakistan’s weight in the MSCI index (0.19pc only which would be further diluted by complete inclusion of China ‘A’ share market and current situation within MSCI FM index where Nigeria was barely able to retain its status in MSCI FM post-imposition of capital control.

Out of the 16 Pakistani companies that are currently part of the MSCI index in FM, only nine would be eligible to join EM, giving Pakistan a 0.19pc weight, making it the smallest county by weight. Out of those nine, OGDC, HBL and MCB will be placed into the large-cap index while UBL, Lucky, FFC, Engro, Hubco and PSO would likely be placed in the mid-cap index.

At the several international investor conferences held overseas in the recent months, Pakistani market regulators; investment strategists and companies tried to put up a solid case before the foreign fund managers for their positive vote to the inclusion of Pakistan in MSCI EM. Regulators tried to assuage foreign fund managers’ biggest fear of recurrence of market closure episode — imposition of ‘floor’ for over four months — which in 2008 had led to Pakistan’s expulsion from the FM and a later entry into the Frontier Market index.

Published in Dawn, June 15th, 2016