The country’s return to the emerging markets index was announced on 15 May and had led many to expect renewed investment interest in Pakistan.
“Local investors had positioned with expectation” of inflows, said Ovais Ahsan, regional sales trader at Renaissance Capital in Dubai, told Reuters. “Everyone in general was expecting $200m to $500m (£389m, €446m) of net inflows.”
However, this failed to materialise, with some pointing to Pakistan’s economy as the biggest issue.
“Active foreign fund managers have concerns on the economy, mainly the current account and rupee resistance,” Muhammad Rameez, head of international sales at Foundation Securities Pvt., who had correctly predicted net outflows ahead of the upgrade, told the newswire.
Pakistan was downgraded to frontier in 2008 after trading was halted for months in the Karachi exchange following market turmoil. Improving liquidity and growth saw its widely-expected return announced mid-May.