ISLAMABAD, June 2 (DNA): Pakistan’s re-entry into the

emerging market block, achieved with an amazing speed due to
China Pakistan Economic Corridor (CPEC), driven optimism, is
a first step towards becoming an Asian Tiger that would lure
wider class of investors, injecting huge amounts of money into
the country.
According to an article appeared in Tokyo-based magazine
The Diplomat, Pakistan is the first country to get the
frontier-to-emerging market promotion in MSCI’s latest review
after Qatar and the United Arab Emirates several years ago.
Experts expect global funds to come pouring into
Pakistan’s stock markets as a result.
Pakistan’s stock market has made history, giving a
thrilling lesson to global investors and businesspeople who
are wondering why money is flowing into this country despite
many challenges.
Indeed, economic growth is stabilizing Pakistan’s
political atmosphere in Karachi, Balochistan, and the
Federally Administered Tribal Areas (FATA).
The upgrade puts Pakistan in good company. Other members
of MSCI’s Emerging Markets Asia Index include China, India,
Indonesia, Malaysia, the Philippines, South Korea, Taiwan, and
Thailand. This shift will attract foreign investment into
Pakistan.
The chief reason behind Pakistan’s emerging status is
China-funded loans and investments made under the umbrella of
CPEC, with Pakistan following pattern of Argentina and
Vietnam.
CPEC, as the flagship of China’s Belt and Road project,
helped rapidly convert Pakistan into an Asian “emerging
market.” The settling of the balance of payments also helped
Pakistan to achieve this status.
According to Finance Minister Mohammad Ishaq Dar in his
budget speech on May 26, Pakistan would become an “emerging
market” effective June 1, on the basis of the performance of
the Karachi Stock Market (KSE100), which emerged as the most
profitable market in Asia last year.
Pakistan had lost `Emerging Market’ position in late
2008, following a period of market turmoil that halted trading
for months in Karachi.
The outclass performances of Pakistan’s banking, energy,
cement, oil and gas, and fertilizer sectors added to this
performance and brought Pakistan into the limelight of stock
markets around the world.
Global X MSCI Pakistan ETF quadrupled in value
last year, reaching US$48 million. In 2016, Pakistan’s KSE100
was the top-performing market in Asia, with 46 percent growth.
Other Asian giants like Japan, South Korea, Singapore,
Thailand, and Malaysia have long resisted investing in
Pakistan’s markets.
Now the performance of the KSE100 has outclassed the
rest of Asia and Pakistan has become an emerging market. If
these countries continue to ignore the Pakistani market, it
will clearly be for political reasons rather than
market-driven sentiments.
Japan, South Korea, and other East Asian investors in
particular need to overhaul their basic investment strategy
toward Pakistan and reap the benefits.
The market is offering lucrative benefits. The KSE100’s
outperformance is likely to continue given Pakistan’s GDP
growth, falling poverty, and burgeoning middle class. GDP
growth has hit an all time high of 5.2 percent in the past
decade.
Yes, isolated terrorist incidents will continue to have
small-scale effects on the economic management, but they will
not be major impact factors.
Plus, unlike many East Asian economies, Pakistan’s
market is virtually free of the impact of North Korean
provocations. East Asian investors need to take these factors
into account while investing in Pakistan as new frontiers are
emerging under CPEC.
The prudent macro-economic management and fiscal
discipline of the present government over the past four years
and its CPEC-driven enthusiasm have led Pakistan to achieve
its goal of regaining emerging market status.
Pakistan must continue to strive to improve corporate
governance to better its chances of becoming an Asian tiger.
Efforts should be made at the bilateral and multilateral level
to convince investors from East Asia, Europe, North America,
and Oceania to investment in Pakistan.