Pakistan is expected to attract an additional foreign portfolio investment worth $65 million over the next six to nine months period in the aftermath of planned transition of six international index funds to FTSE indices from the MSCI indices, reported KASB Securities.
“Six Vanguard international index funds with aggregate assets of $170 billion will be transitioned to FTSE indices from the current MSCI indices in the few next months,” said the brokerage house, adding that Vanguard is one of the top three US asset management firms.
Since Pakistan is part of FTSE EM index and carries 0.12 per cent weight in the index, it would attract $65 million foreign portfolio investment in the next six to nine months.
It should be remembered that Pakistan is not a part of MSCI EM index.
“Our channel checks suggest that at least $54 billion funds are passively tracking the MSCI EM index and will help transition to FTSE EM index over the next few months.”
“The move could, hence, translate into ‘potential’ passive flows of $65 million into Pakistan, assuming the $54 billion is proportionately reallocated to FTSE EM components.”
The transition of six Vanguard international index funds to FTSE indices included the world’s largest emerging market fund, the $67 billion Vanguard Emerging Markets Stock Index Fund, and its exchange traded fund, which is also the world’s second-largest ETF by AUM, the brokerage house said.
Pakistan’s 0.12 per cent weight is spread over five constituents, ie, MCB Bank, Oil and Gas Development Company (OGDC), Fauji Fertilizer Company (FFC), Pakistan Petroleum Limited (PPL) and the National Bank of Pakistan (NBP).
KASB Securities calculated that the transition of funds would attract an additional investment of $21.4 million in the MCB Bank, $19.1 million in OGDCL, $11.9 million in FFC, $9.7 million in PPL and $2.7 million in NBP. Meanwhile, the Asian Development Bank (ADB) has enhanced Pakistan’s growth forecast for the year 2012 to 3.7 from 3.6 per cent projected earlier.
For Asia, the bank has scaled back 2012 and 2013 growth forecasts, saying after years of rapid growth, the region should brace for a prolonged period of moderate expansion amidst an ongoing slump in global demand. In its Asian Development Outlook 2012 Update, the bank predicted Pakistan’s growth at 3.7 per cent.