MSCI Inc. (MSCI), which is leading provider of decision tools and services for the global investment community, announced the result of its Annual Review where MSCI added Kuwait Index to Emerging Markets status subject to conditionalities.
Prior to the announcement, there was the risk of Pakistan being referred to Downgrade Consultation in Annual Review. The proposition to upgrade Kuwait to Emerging Market Status increased the chances of Pakistan for Downgrade Considerations. However, MSCI refrained from putting Pakistan for Downgrade Consideration.
If Pakistan had been put on Downward Consideration, it was expected that downgrade and resultant rebalancing would have occurred in November 2020.
Kuwait is expected to gain significant weight in the MSCI Emerging Market Index while US$2.5 billion Inflow is expected after the upgrade. This is expected to decrease the already marginal weight of Pakistan in the Emerging Market Index.
Pakistan, keeping in view its existing Risk Profile, is better suited for MSCI Frontier Index. The downgrade to Frontier Market Index will lead to increased inflow in the market as Pakistan Carries relatively better weight in the Frontier Market Index as compared to Emerging Market Index.