As Pakistanis, we don’t hear this kind of statement every day, but the bullish trend at the country’s stock market has returned. However, the question that arises here is that, is it here to stay?
The KSE-100 Index, which can be considered a benchmark for performance, has hiked 5.1% in the past four sessions alone, which says a lot about why Pakistan Stock Exchange was the top-performing market in Asia in the preceding fiscal year. The positive streak is in contrast with the performance of stock market in the last three months in which it retreated from close to 50,000 to near 46,000 points, marking an overall decrease of a whopping 8%.
So what has changed in Pakistan Stock Exchange (PSX)?
At first, Pakistan will be reclassified from a frontier market to the MSCI Emerging Market Index on May 15th, 2017. We will finally be in the big sharks group from this month.
Foreign investors have started taking interest in investing in Pakistan and local companies have also begun to factoring in the inflow. Nevertheless, the main question over here is how much money will Pakistan attract?
For those who are not aware, foreign investors have been the net sellers of stock worth almost half-a-billion dollars at PSX, ever since MSCI announced that it would upgrade Pakistan from frontier market to emerging market index last June.
On the other hand, Pakistan has been suffering political uncertainty in the backdrop of Prime Minister Nawaz Sharif’s Panama case scandal. Adding to that, very recently, Pakistan has received a number of security threats from its neighboring countries, adding to the political tension in the region. Albeit all these happenings, institutional investors and brokerage firms have done well to maintain their bullish stance.
However, despite all the odds, Pakistan is finally entering MSCI emerging market index after nine years.
“It (upgrade) is obviously very good news. It will attract foreign investors,” said National Investment Trust (NIT) Chief Operating Officer Manzoor Ahmed.
NIT is the biggest asset management firm in the country with funds approximately over PKR 120 billion and is currently the leading investor at the PSX.
“Political situation has never remained ideal in Pakistan. It’s built-in in our stock prices,” he added.
Many other stock markets across the globe, which are upgraded to MSCI emerging market index, have experienced an increase in the foreign investments. The same is expected for Pakistan. Further, stocks play a very important role in driving the markets and corporate earnings, dividend yield, and price-to-earnings ratio of stocks because of which PSX remained attractive, Manzoor Ahmed said.
In any case, we hope Pakistan Stock Exchange (PSX) to make huge strides in the financial markets across the globe.
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