Published On: Thu, Jun 16th, 2016

PSX soars to all-time high after MSCI upgrade

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A Pakistani stockbroker talks on a phone as he watches the latest share prices during a trading session at the Pakistan Stock Exchange (PSE) in Karachi on January 14, 2016. The benchmark PSE-100 index ended down 593.74 points at 31560.43 in midday trade. AFP PHOTO / RIZWAN TABASSUM / AFP PHOTO / RIZWAN TABASSUM

A Pakistani stockbroker talks on a phone as he watches the latest share prices during a trading session at the Pakistan Stock Exchange (PSE) in Karachi on January 14, 2016. The benchmark PSE-100 index ended down 593.74 points at 31560.43 in midday trade. AFP PHOTO / RIZWAN TABASSUM / AFP PHOTO / RIZWAN TABASSUM

ISLAMABAD: Pakistan’s benchmark index jumped as much as 3 per cent in early trade on Wednesday, climbing to a record high after the country’s stock market was reclassified overnight and included in the MSCI’s emerging market index category.

By 10:55am, the KSE-100 index of the Pakistan Stock Exchange (PSX) was up 865.68 points, or 2.3 percent, at 38,383.43 points.

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The index recorded its biggest single-day gain since March 31, 2015, and is one of Asia’s best performers this year.

Pakistani brokerages upgraded their outlook on the market and said the main index was now likely to rise above 40,000 by the end of the year.

“Pakistan’s market multiple is lower than the emerging market multiple so there will most likely be a re-rating of the Pakistan market in the short term,” said Saad Hashmey, chief economist and director of research for Topline Securities.

“It might not be as high as the emerging market but there will be plenty of upside,” he added.

The stock exchange was dropped from the MSCI Emerging Markets Index when it imposed a floor on the market during the financial crisis in 2008, effectively trapping local and foreign investors for several months.

Over the past few years officials have been enacting a host of market reforms to regain the trust of investors, including demutualising Pakistan’s bourses to weaken the influence of stockbrokers and deepen the investor base.

Intermarket Securities, a local brokerage, said the move by MSCI had prompted it to upgrade its end-of-year target for the benchmark index to 41,000 points.

“The jovial mood following this re-rating event is expected to reflect in market performance today,” Intermarket said in an early morning research note.

Traders said large-cap stocks expected to be included in the MSCI Emerging Market index were trading higher. Habib Bank was up 3.83pc at Rs191.30, while Oil and Gas Development Company jumped 2.95pc to Rs146.60.

Research firms estimate the MSCI upgrade will result in about $400 million in inflows into Pakistan’s stock market by passive tracker funds alone.

MSCI announced late on Tuesday Pakistan’s reclassification from frontier to emerging market in an eagerly awaited review. The US-based provider of stock market indexes and portfolio analytics, had hinted last year that Pakistan’s inclusion in the Emerging Markets category will be discussed in June 2016.

Topline Securities CEO Muhammad Sohail told Dawn.com investor outlook remains positive as Pakistan is now in the same league as other rising economies in the region such as India, Malaysia, and Indonesia.

“Investors are looking very seriously at strong eight to nine companies with good fundamentals,” said Sohail, commenting on the stocks expected to be included in the MSCI Pakistan Index.

He said stocks from four sectors were under consideration for the index ─ these include banking, cement, energy, and fertiliser sectors. Chemicals and pharmaceutical stocks will not be included in the MSCI index, despite performing well recently, he added.

The KSE-100 index has been on the rise recently in anticipation of yesterday’s upgrade and exposure to foreign markets and investment – that resulted in positive net foreign buying over the past few days.

News Source Dawn

About the Author

Syed Ammar Alavi

- is Lahore (Pakistan) based journalist & writer with 25-year experience in print, wire and broadcast forms of journalism. His major fields of interest are politics, film,tv,sports, climate change and technology

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