Which IA funds will benefit from Pakistan’s MSCI upgrade?


Nineteen IA funds have existing exposure to Pakistan, which this week transitioned from a frontier to emerging market under MSCI classifications.

Charlemagne’s Magna New Frontiers fund has 14 per cent allocated to the South Asian country, followed by Baring’s Frontier Markets, which has 12.2 per cent, and T Rowe Price’s Frontier Market Equity at 11.8 per cent, FE analysis reveals.

Not all those with exposure are frontier funds with Templeton’s Asian Growth, which invests in Asia ex-Japan, fund having 9 per cent allocated to Pakistan, and Allianz’s Oriental Income fund, which invests in Asia-Pacific, having 3 per cent.

The classification change is expected to see Pakistani markets attract more attention from international investors and a boost from trackers with a mandate to the MSCI Emerging Market Index.

Pakistan has been absent from the emerging market index since the Karachi Stock Exchange temporarily closed due to a liquidity crunch in the midst of the global financial crisis. Before then it had been a part of the index since 1994.

Pakistan’s promotion comes as MSCI delays the inclusion of mainland-traded Chinese shares, known as A-shares, from its Emerging Markets index, due to concerns about market accessibility. Chinese stocks listed in Hong Kong or the US still appear in the index.

Foreign investment in A-shares is tightly regulated, meaning they are mostly only available to mainland citizens.

FE research analyst Luke Ng says: “Now relative to the A-share market, Pakistan has a more open market with none of the foreign ownership and capital mobility issues, which means foreign investors are able to move in and out of the market without limitations.”