The latest MSCI market classification review proposes to reclassify the MSCI Pakistan Index from MSCI’s Emerging Markets (EM) to Frontier Markets status. This is because Pakistan’s market no longer meets the standards for size and liquidity that the EM index requires. It also doesn’t have any big enough stocks.
As Renaissance Capital’s head of equity strategy Daniel Salter notes: “Our sense is that investors will probably not object to Pakistan being reclassified, though they might well be frustrated with the way Pakistan appears to ping pong between categories.”
Heart of the problem
Pakistan first entered the MSCI EM index in 1994 and stayed there happily until it was kicked out of the index in December 2008 after imposing floor prices “which led to the practical shutdown of the equity market,” Renaissance says.
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