Out of the 25 countries in the MSCI Frontier Market (FM) Index, Pakistan was the second best performing with a gain of 56 percent in dollar term in the MSCI Pakistan Index. However, the KSE 100 Index has gained 36 percent in local currency and 30 percent in US dollar terms from January 2009 to date.
"The IMF funding that has stabilised the deteriorating balance of payment conditions has played a key role in the overall economic stability and recovery in share prices in Pakistan", Muhammad Sohail, leading analyst and CEO of Topline Securities said. "Though foreigners have so far sold shares worth more than $200 million on net basis, market has performed well due to active support by local investors as valuation touched record low levels", he added.
Sri Lanka was the best performing FM with 124 percent increase in its stocks due to the end of the 26-year civil war that frees up government spending for investments in infrastructure and agriculture. He said that after murky performance in 2008, equity markets world-wide have posted decent gains in the last few months thanks to stimulus packages, liquidity injections and signs of economic recovery.
Emerging Markets (EM) stole the show this time also as they have posted a gain of 46 percent so far this year beating the Morgan Stanley Capital International (MSCI) World Index that has improved 14 percent. The Arab Markets has inched up 18 percent this year as measured by the MSCI index. On the other hand, frontier markets (FM), Pakistan is part of that, is only up 11 percent and is the worst performing category in the MSCI basket of indices which is widely used globally to manage portfolios.
Comparing Pakistan's performance with MSCI EM no longer makes sense as MSCI removed Pakistan from the MSCI EM Index as of the close of December 31, 2008. The removal was a result of the imposition of the "floor rule" due to which Pakistan's equity market suffered huge setback in terms of market's accessibility framework and low investor's confidence.
In May 29, 2009 Pakistan was included in MSCI Frontier Index with 12 companies (that has recently been increased to 14) because features of Pakistan equity market is more matched with the MSCI Frontier Index Profile, according to MSCI. As per definition frontier markets are smaller, more undeveloped and riskier than emerging markets. As per MSCI Indices year-to-date performance, the World Index increased by 14 percent, Emerging Markets 46 percent, Frontier Markets 11 percent and Arabian Markets 18 percent.
According to data available, the country wise performance in the MSCI Frontier Markets was as Sri Lanka gained 125.0 percent, Pakistan 56. 0 percent, Kazakhstan 37.0 percent, Vietnam 33.0 percent, Slovenia 32.0 percent, Lebanon 29.0 percent, United Arab Emirates 29.0 percent, Mauritius 21.0 percent, Argentina 24.0 percent, Tunisia 19.0 percent, Croatia 19.0 percent, Bulgaria 21.0 percent, Oman 17.0 percent, Ukraine 15. 0 percent, Kuwait 13.0 percent, Lithuania 11.0 percent, Estonia 7.0 percent, Kenya 0.5 percent, Qatar -2.0 percent, Trinidad and Tobago -2.0 percent, Serbia -2.0 percent, Romania -6.0 percent, Jordan -11.0 percent, Nigeria -26.0 percent, Bahrain -28.0 percent while the FM (Frontier Markets) 11.0 percent.