MSCI Considering To Demote Pakistan From From Emerging Market (EM) To Frontier Market (FM)

Business magnate Arif Habib said that it was never a comprehensive approach to shift to the MSCI EM from MSCI FM in the first place.

File:MSCI logo 2019.svg - Wikimedia CommonsIn an unexpected move, the MSCI Inc. is considering demoting Pakistan to Frontier Markets (FM) from Emerging markets (EM).

The MSCI is expected to discuss the possible reclassification with market associates by the 31st of August, 2021.

A final decision in this regard will be announced on the 7th of September, 2021.

The basis for possible reclassification is the constant decline in market capitalization of the South Asian country’s constituents (companies listed at the PSX) since 2017.

PSX sees biggest single day decline in 10 years - Newspaper - DAWN.COM

This leads to the ineligibility of the stock market to satisfy the criteria for the market distribution structure for the EM Index.

Nevertheless, many market participants have continued to uphold that Pakistan was much better off in the FM.

Business magnate Arif Habib said that it was never a comprehensive approach to shift to the MSCI EM from MSCI FM in the first place.

“Due to the more substantial weightage in FM, the Pakistan market was able to draw passive funds with net ventures into the local market. It has been the other way round since the admission into EM with persistent external outflows”, he said.

Meanwhile, Topline Securities said in its report disclosed on Friday that the reclassification to FM from EM may turn out to be beneficial for the country in terms of increasing visibility among foreign participants.

What are your views on this? Share with us in the comments below.


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