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MSCI semi-annual index review: Pakistan not included in Emerging Market Index

By Tanveer Ahmed

KARACHI: Pakistan could not find a place into the Emerging Market Index of Morgan Stanley Capital International Inc (MSCI).

MSCI, a leading provider of benchmark indices and risk management analytical products, has announced the results of November 2009 semi-annual index review. All changes announced this week become effective at the close of markets on November 30, 2009.

“Pakistan will continue to be classified into Frontier Market Index – one notch down from Emerging Market Index,” the information received here on Thursday suggested.

MSCI Pakistan Index was removed from the MSCI Emerging Markets Index as of December 31, 2008, in the wake of persistent deterioration of investment conditions following the imposition of the floor in the stock market.

However, Pakistan regained its MSCI membership in semi-annual review of May 2009 but was classified into Frontier Market Index. MSCI also announced one addition and one deletion in MSCI Pakistan Index - Engro Chemicals replaced NIB.

Thus on net basis, total number of companies in MSCI Pakistan Index remains unchanged at 14. Other Pakistani stocks in MSCI FM Index includes, OGDC, MCB, HBL, FFC, PSO, PPL, NBP, UBL, PTCL, POL, JSCL, Hubco and Kapco.

Commenting on the latest development, stock analysts remarked that due to the absence of any pre revision discussion of Pakistan authorities for upgrading into Emerging Markets, they were not expecting an upgrade for Pakistan into MSCI EM Index.

“The announcement is not surprising this is what we were expecting from the semi annual review,” Faraz farooq, analyst at First Capital Equities said.

Pakistan stock market recovered well in the recent months following the worst phase it passed through in the last months of 2008 when benchmark KSE-100 index was frozen incurring heavy losses to investors.

Though floor was removed in mid-December but it was down by the international credit rating agencies and the removal from MSCI index was one example.

Since the start of current financial year, market performed exceptionally well when index was seen breaking successive barriers with the reinvigorating interest of local and foreigners investors.

The inclusion of Pakistan in Emerging Market Index would be based on how it performed in the period before the next review scheduled in May 2010.

The next semi-annual review could be a key event for Pakistani market amid hopes of a potential upgrade into Emerging Market Index, which analysts believed is more dependent on how the authorities pitch the case.

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