KARA CHI - The status of Pakistans stock market is unlikely to be upgraded into MSCI Emerging Market Index from the current classification of MSCI Frontier Market Index in its upcoming review, which is scheduled to be announced this month. Sources in the equity market told The Nation that MSCI Barra, a leading provider of benchmark indices and risk management analytical products, will announce results of the May 2010 Semi-Annual Index Review of its indices on May 11, 2010. While MSCI rebalancing holds significant importance for global indices, it is also deemed as an important event for Pakistan market which has been in the radar of foreign investors. The latest numbers suggest that foreign funds collectively hold 7.2 per cent of Pakistan market. Adjusted for free float, the share of foreign holding emerged more significant at 30 per cent (KSEs market free float is 25%). MSCI Barra monitors each of the markets on an ongoing basis for any potential reclassification and before taking any decision of inclusion or deletion of a country in or from the Emerging Markets eligible universe, a public consultation is conducted with market participants. An analyst from FECL Research was of the view that apparently, the size and structure of the Pakistani equity market today seems to be more aligned with the Emerging Markets universe on both quantitative and qualitative basis. That said, the benchmark KSE-100 index has gained 17.4 per cent (16.5% in US$ terms) since last review of MSCI in November 2009 while the return arrives at 44 per cent (39% in US$ terms) when calculated from the date of Pakistans inclusion (May 2009) in MSCI FM Index. During this period, the improving macro-economic indicators and stability on the political front helped Pakistani equities attracting renewed interest of foreign investors. This is clearly evident from the fact the market has received US$520mn net foreign portfolio investment compared to a net outflow of ~US$600mn in the preceding period (May 2008-April 2009). This also highlights the markets strengthening accessibility framework and growing foreign investors confidence, analyst said. It is important to note that currently, under the Frontier Markets framework, the MSCI Pakistan Index includes 14 constituents with a total float adjusted market capitalization of US$4.6bn (based on April 20, 2010 prices). With a weight of 4.0 per cent in the MSCI Frontier Markets Index, Pakistan stands as the 7th largest MSCI country index out of the 25 MSCI Frontier Markets. It may be recalled that after consistently remaining for nearly 15 years (from Feb 2, 1994 to Dec 31, 2008), Pakistan was removed from the MSCI Emerging Markets Index in the wake of deteriorated investability conditions. The decision was specifically taken on the argument that due to the imposition of the floor rule at the KSE effective August 2008; the market activity was almost halted. However, following a consultation with the investment community, MSCI Pakistan Index was reclassified as MSCI Frontier Markets Index in May 2009 Semi-Annual Index Review. In addition, it was also reported by MSCI that the majority of the participants to the consultation stressed the need for the Pakistani equity market to function without any trading disruptions for some time as a condition to any potential consideration of the MSCI Pakistan Index for re-inclusion in the MSCI EM Index. Nonetheless, there were some expectations amongst the local investors regarding the potential upgradation into the EM Index in November 2009 Semi-Annual Index Review considering the progressively improved and fairly sustained investability conditions including market accessibility. At that time there were no any consultation opened for any such consideration and Pakistan was continued to be classified under MSCI FM Index in the previous Semi-Annual Index Review.