As Pakistan’s reforms begin to produce favorable results, investors can tap into the growing frontier market through a recently launched country-specific exchange traded fund.
In April, the Global X MSCI Pakistan ETF (NYSEArca: PAK) began trading. PAK has increased 4.1% and has gathered $5.51 million in assets under management.
Bolstering Pakistan’s investment case, the International Monetary Fund stated that the country’s efforts to diminish its budget deficit, build its foreign reserve and other economic reforms “has significantly reduced near-term risks,” reports Art Mooradian for the Wall Street Journal.
Pakistan only narrowly missed some budget deficit, tax revenue and government borrowing targets. Additionally, the country’s foreign exchange reserves at the state bank hit $13.5 billion at the end of June, rising at a healthy clip.
The organization also pointed to Pakistan’s progress in implementing social programs, restructuring loss-making public enterprises, advancing energy-sector reforms and improving its business climate.
The changes “will help strengthen competitiveness and resilience of the economy and transform Pakistan into a dynamic emerging-market economy,” the IMF said.
Moreover, reforms could help bolster the country’s financial and energy sectors, two major components of PAK’s underlying holdings at 36.7% and 22.4%, respectively.
Looking ahead, the IMF projects Pakistan will experience strong economic growth, with gross domestic product to rise 4.5% this fiscal year. The inflation rate has dipped to 1.8% in July, but it is expected to rise later this year if commodity prices stabilize.
Growth has been “helped by macroeconomic stability, low oil prices, planned improvements in the domestic energy supply, and investment related to the China-Pakistan Economic Corridor,” according to the IMF.
The reforms and healthy growth has put the country on course for an upgrade in MSCI’s indexing classification from frontier market to emerging market. If such a move happens for Pakistan, it would take place part of MSCI’s 2016 annual market classification review. [Pakistan ETF Could get a Lift From EM Upgrade]
Global X MSCI Pakistan ETF
For more information on Pakistan, visit our Pakistan category.
Max Chen contributed to this article.