THE RISE OF CAPITAL MARKET

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Pakistan stock exchange was formed in January this year after merger of Karachi, Lahore and Islamabad stock exchange. It was considered as an initiative to reduce the fragmentation of market and to attract strategic partners from overseas. Investor within and outside the country appreciated this move by government. It was also observed as a move to discourage arbitrage going on country in different sectors.
As soon as the announcement was expected from Morgan Stanley Capital international (MSCI), the marker started a positive trend. The investors poured in the capital from both local as well foreign sources. With the improved security and investor confidence prevailing in the country, the market was already on a growing side. In last couple of months with the news circling the business world the KSE-100 index gained almost 3,000 points. Pakistan’s Share posted their biggest weekly gain in three years to attract the attention of international market index. On the big day of announcement, the market shifted overnight and showed an all time high performance when KSE-100 index reached 38,550. It was observed as one of the Asia’s best performance of the year. The market showed a steep increase as share prices soar to all time high. On the same day, our finance minister visited the office of security regulatory authority In Pakistan (Security and Exchange commission of Pakistan) and applauded the news. He said it was a landmark achievement, a historic day and regarded it as a big success for country.

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Morgan Stanley Capital international (MSCI) is one of the primary benchmark indexes outside United States of America. Pakistan was included by MSCI in its status of EM (Emerging Markets) in early 90’s. This EM (Emerging Market) status was however downgraded to FM (Frontier Market) in 2009 after the closure of stock market for some period. The MSCI announced that Pakistan will be included in its semi-annual index for inclusion in the EM index in June, 2017 i.e. one year after the decision. MSCI has considered the growing confidence of investor in PSX to upgrade the status of market. Stable market and growth rate with incentive and securities from Govt. of Pakistan were all major contributing factors. Another key to attract such move was the improved law and order situation of the country.
Last year after review, Qatar and UAE stock markets were upgraded to Emerging Market status. These two markets received an amount of around US$ 400 million within first 6 months of move in their status. Accordingly Pakistan is expected to receive US$ 300 million within one year of change in its status. AS a result total number of companies will be cut down from 36 (currently on FM market status) to 28 companies. According to MSCI official website Pakistan has an average weight of 8% in FM, which is a very strong index while it will have potential weight of only 0.19% in EM market. Major companies to be included in EM status include Oil and Gas Development company Limited, Habib Bank Limited, MCB bank limited, United bank limited, Lucky cement limited, Fauji fertilizer company, Engro corporation, Hub power company and Pakistan State oil. Eventually Pakistan is included in good capital markets and is among some good performers.

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