MSCI proposes downgrading PSX to Frontier Markets Index

June 25, 2021

MSCI proposes downgrading PSX to Frontier Markets Index

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Morgan Stanley Capital International (MSCI) proposed to downgrade the Pakistan Stock Exchange (PSX) to its Frontier Markets (FM) Index in November 2021 from the Emerging Markets (EM) Index at present.

According to local media reports that surfaced on Friday, MSCI will consult with market participants on this reclassification proposal until August 31, 2021, and will announce its decision by September 7, 2021.

However, as an immediate reaction to the potential move, local and foreign investors may resort to panic selling of shares at the domestic stock market and new investors might assume fresh positions across the board.

The MSCI is expected to discuss the potential reclassification with market participants till August 31, 2021.

MSCI has been artificially maintaining Pakistan’s stature in Emerging markets since the country has been no longer meeting EM standards for size & liquidity criteria for the last 19 months, according to a statement released by MSCI.

Therefore, it is now proposed to put Pakistan back to Frontier markets with a higher weight of 2.3 per cent from the existing meager country weight of 0.02pc in Emerging markets. Pakistan is likely to have a weight of 5.8% in the MSCI Frontier Market Index.

Pakistan was upgraded to MSCI Emerging Markets Index in May 2017 after a gap of nine years.

On Friday, the benchmark KSE-100 Index closed the first session at 47,791.90 points after a loss of 170.64 points or 0.36pc.

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