Pakistan stocks downgraded to frontier market by FTSE Russell

Pakistan's market status has been lowered from secondary emerging to frontier market by FTSE Russell, impacting equities with potential outflows. Despite this, the market remains optimistic due to IMF support. Debt concerns and political volatility have contributed to Pakistan's struggle to maintain its market size and liquidity.

was lowered to frontier market status from secondary emerging market by , dealing a blow to the nation’s equities and potentially driving millions of dollars in outflows.

The South Asian country’s market failed to meet the minimum securities count requirement for retaining its current status, the index compiler said in a statement Wednesday. The decision comes into effect on September 23, it added.

The development did little to dim the optimism around the nation’s equities, which are the best performers in Asia in dollar terms after rising over 30% this year on support by the International Monetary Fund. The benchmark KSE-100 index rose as much as 0.7% on Thursday to a fresh record.

“The FTSE decision was expected and it had no impact on the market,” said Mohammed Sohail, Chief Executive Officer at Topline Securities Ltd., from Karachi “Investors are hopeful that long-term IMF funding will stabilize the economy and Pakistan will be able to overcome its economic challenges.”

Debt concerns and political turmoil have caused volatility in the nation’s stocks over the years, eroding market capitalization. Pakistan lost its emerging-market status at MSCI Inc. in 2021, just four years after it was upgraded, due to its shrinking market size and liquidity.

The benchmark KSE-100 Index has surged from a low last year, outperforming most global peers in the past 12 months, with help from a loan deal with the International Monetary Fund. Still, FTSE Russell placed the nation on its watch list for a possible demotion to frontier market in its September review, saying its index weight had decreased steadily over the past few years and its “minimum investable market capitalization” fell below the level required to retain its status.

Pakistan is seeking a long-term loan from the IMF and the country’s finance minister Muhammad Aurangzeb has said the deal worth more than $6 billion will be reached this month.

Source: Stocks-Markets-Economic Times