In a significant shift, FTSE Russell has downgraded Pakistan’s status from a secondary emerging market to a frontier market due to failing to meet the minimum securities count requirement.
KARACHI: FTSE Russell announced on Wednesday that it has downgraded Pakistan’s classification from a secondary emerging market to a frontier market. This decision was made after Pakistan’s market failed to meet the minimum securities count required to maintain its current status.
According to the FTSE statement, the reclassification is based on data as of June 28, 2024. Pakistan did not meet the necessary criterion of having at least two eligible constituents in the FTSE Emerging Index, leading to its downgrade. This reclassification will take effect from September 23, 2024, in conjunction with the FTSE Global Equity Index Series and the FTSE Frontier Index Series reviews.
Previously, in March 2024, FTSE had placed Pakistan on the watch list for a potential downgrade from secondary emerging market status. Over recent years, Pakistan’s weight in FTSE Russell’s global benchmarks had steadily declined, resulting in the market not meeting the minimum investable market capitalization threshold required to retain its status.
Despite narrowly meeting the threshold in June 2023, which kept Pakistan in the secondary emerging market category temporarily, the continued decline in market metrics led to the eventual reclassification to a frontier market.
This downgrade comes as Pakistan’s economic environment remains challenging, and despite efforts to meet international benchmarks, the market failed to maintain the required criteria. The reclassification reflects ongoing issues with Pakistan’s market liquidity and investable market capitalization.
As the country adjusts to this new classification, there are hopes for economic recovery and improvement in market conditions to regain its previous status in the future.
