ID :
190500
Wed, 06/22/2011 - 16:42
Auther :
Shortlink :
http://m.oananews.org//node/190500
The shortlink copeid
Morning Shout released by KASB Securities Limited and Economics Research
MSCI Annual Review - Feedback sought on Pakistan
According to KASB Securities Limited,
• MSCI announced the 2011 Market Classification Review overnight, where Pakistan’s case for upgrade to EM is not included in the review for 2012. However seeking of investor feedback on the issue is a positive, in our view.
• Decision on Qatar and UAE’s case for upgrade to MSCI EM was deferred for six months to Dec‐11.
• To recap, the upgrade of Qatar and UAE to EM should lead to around 1% weightage gains for Pakistan in MSCI FM.
MSCI Annual Classification Review 2011
MSCI announced the results of the 2011 Market Classification review overnight. As discussed in our earlier note, 1) MSCI’s view on upgrading Pakistan to Emerging Markets and 2) upgrade of Qatar and UAE to EM were the two developments worth tracking from Pakistan’s vantage point (details below). In other developments, MSCI did not upgrade Korea and Taiwan to MSCI Developed Markets while it highlighted that the status of markets like Egypt, Portugal, Italy and Greece remains unaffected despite to the recent political/ economic turmoil. No new countries were added to the review list for 2012.
Pakistan not put up for review….
In line with expectations, Pakistan's case for a potential upgrade to Emerging Markets is not included in the review for 2012. MSCI’s view on the issue is:
similar to the situation last year, the Pakistani equity market continued to be characterized by a very limited number of sizable securities and a reclassification of the MSCI Pakistan Index to the Emerging Market status would result in including only three index constituents meeting the MSCI Emerging Markets minimum size requirements. Changing the status of an MSCI country index should be viewed as an irreversible movement. Due to the irreversibility requirement, MSCI will not include the MSCI Pakistan Index in the review list for potential reclassification to Emerging Markets as part of the 2012 Annual Market Classification Review and will continue to monitor the development over next year. MSCI welcomes feedback from market participants on this topic.
but soliciting investor feedback is positive
The soliciting of investor feedback is a positive in our view. Our channel checks suggest that the borderline nature of Pakistan’s case (only 3 constituents meeting size criteria ‐ US$1,010mn full market cap and US$505mn free float market cap i.e OGDC, MCB and FFC) did influence the decision. However, one of the key reasons for not considering Pakistan for an upgrade is the lack of investor interest in the same. The same can in turn be attributed to the fact that formal feedback on the issue has not been sought from clients to date which has been addressed in the current review.
Decision regarding upgrade of UAE and Qatar deferred to Dec
The decision regarding upgrade of Qatar and UAE to MSCI Emerging Markets was deferred for 6 months to Dec 2011. As KASB Securities Limited has highlighted earlier, the short intervening time between introduction of DVP (delivery vs payment) and the Annual Review (~1 month) was deemed insufficient by investors. In addition, the stringent foreign ownership limits in some key stocks in the Qatari market was also highlighted as an obstacle to potential upgrade. The additional review period hence gives more time to the regulators and stock exchanges to address remaining concerns raised by international institutional investors. From Pakistan’s vantage point, the upgrade of these two markets should lead to ~1% weight‐age gains in MSCI FM to ~5%. In case of a decision to upgrade Qatar and UAE in Dec, the timeline for implementation will remain drawn out, with Nov‐12 cited as the earliest possible date for implementation.
According to KASB Securities Limited,
• MSCI announced the 2011 Market Classification Review overnight, where Pakistan’s case for upgrade to EM is not included in the review for 2012. However seeking of investor feedback on the issue is a positive, in our view.
• Decision on Qatar and UAE’s case for upgrade to MSCI EM was deferred for six months to Dec‐11.
• To recap, the upgrade of Qatar and UAE to EM should lead to around 1% weightage gains for Pakistan in MSCI FM.
MSCI Annual Classification Review 2011
MSCI announced the results of the 2011 Market Classification review overnight. As discussed in our earlier note, 1) MSCI’s view on upgrading Pakistan to Emerging Markets and 2) upgrade of Qatar and UAE to EM were the two developments worth tracking from Pakistan’s vantage point (details below). In other developments, MSCI did not upgrade Korea and Taiwan to MSCI Developed Markets while it highlighted that the status of markets like Egypt, Portugal, Italy and Greece remains unaffected despite to the recent political/ economic turmoil. No new countries were added to the review list for 2012.
Pakistan not put up for review….
In line with expectations, Pakistan's case for a potential upgrade to Emerging Markets is not included in the review for 2012. MSCI’s view on the issue is:
similar to the situation last year, the Pakistani equity market continued to be characterized by a very limited number of sizable securities and a reclassification of the MSCI Pakistan Index to the Emerging Market status would result in including only three index constituents meeting the MSCI Emerging Markets minimum size requirements. Changing the status of an MSCI country index should be viewed as an irreversible movement. Due to the irreversibility requirement, MSCI will not include the MSCI Pakistan Index in the review list for potential reclassification to Emerging Markets as part of the 2012 Annual Market Classification Review and will continue to monitor the development over next year. MSCI welcomes feedback from market participants on this topic.
but soliciting investor feedback is positive
The soliciting of investor feedback is a positive in our view. Our channel checks suggest that the borderline nature of Pakistan’s case (only 3 constituents meeting size criteria ‐ US$1,010mn full market cap and US$505mn free float market cap i.e OGDC, MCB and FFC) did influence the decision. However, one of the key reasons for not considering Pakistan for an upgrade is the lack of investor interest in the same. The same can in turn be attributed to the fact that formal feedback on the issue has not been sought from clients to date which has been addressed in the current review.
Decision regarding upgrade of UAE and Qatar deferred to Dec
The decision regarding upgrade of Qatar and UAE to MSCI Emerging Markets was deferred for 6 months to Dec 2011. As KASB Securities Limited has highlighted earlier, the short intervening time between introduction of DVP (delivery vs payment) and the Annual Review (~1 month) was deemed insufficient by investors. In addition, the stringent foreign ownership limits in some key stocks in the Qatari market was also highlighted as an obstacle to potential upgrade. The additional review period hence gives more time to the regulators and stock exchanges to address remaining concerns raised by international institutional investors. From Pakistan’s vantage point, the upgrade of these two markets should lead to ~1% weight‐age gains in MSCI FM to ~5%. In case of a decision to upgrade Qatar and UAE in Dec, the timeline for implementation will remain drawn out, with Nov‐12 cited as the earliest possible date for implementation.
