Monday, January 6, 2014

Pakistan Stock Index KSE-100 Among World's Top 5 Performers in 2013

Karachi's KSE-100 Stock Market Index was up 49.4% (37% in US$ terms) in 2013, beating all but four stock indices in the world. It handily beat Morgan Stanley's MSCI emerging market index which remained essentially flat. By comparison, India's main stock index rose just 8.89% in the same period. The remaining three BRIC countries--Brazil, Russia and China-- all saw their key stock indices decline in 2013.

KSE-100 vs MSCI Emerging Markets Index Source: Wall Street Journal

This is a continuation of the bullish trend seen in 2012 when KSE-100 also rose nearly 50% to top all Asian market indices. As of December 31, 2013, KSE-100 is up 329% since the end of 2008. It is being driven mainly by rapid growth in revenue and profits of the listed companies. Even after the strong run-up, the market still remains cheapcurrently trading at over nine times trailing 12 month earnings—a common valuation measure used by stock analysts, according to Wall Street Journal.

World Stock Indices Performance 2013 Source: Seeking Alpha
Dubai finished up the most in 2013 with a gain of 107.69%. Japan was up the fourth most with a gain of 56.72%, making it the best performing G7 country. The US ended up in 9th place globally with a gain of 29.6%. Of the other G7 countries, Germany finished third with a YTD gain of 25.48%, followed by France (17.99%), Italy (16.56%), the UK (14.43%) and Canada (9.55%), according to Seeking Alpha.

The fresh investor optimism in 2013 was triggered by the election of Prime Minister Nawaz Sharif whose government is seen to be business-friendly by investors and businessmen. His finance minister Ishaq Dar claimed that Pakistan's gdp growth accelerated to 5% in July-Sept quarter in 2013. It was driven by large-scale manufacturing (LSM) which grew 12.76 per cent in September 2013 from a year ago.

"Pakistan has a fairly diverse economy with a large and young population that needs to be fed and supplied basic infrastructure such as electricity," Wall Street Journal quoted Caglar Somek, global portfolio manager at Caravel Management in New York, as saying. He manages around $650 million of investments. "If you find the companies that supply those basic needs, growing at double digit with high profitability, you can buy them at valuations that are on average 30% to 40% cheaper than their emerging market peers," said Mr. Somek.

Since the general elections of May, 2013, Pakistan has seen smooth power transfer from one civilian government to another. Other major transitions include the change of President, Army Chief and the nation's powerful Chief Justice of the Supreme Court.

Power cuts are now less frequent after payment of power generation companies overdue bills by the federal government. Financing has been closed on several power projects, including ADB financing of a major coal-fired plant in Jamshoro and Chinese loans for the nation's largest nuclear power plant planned for Karachi.

Progress on economic front, however, is not matched by similar progress on the security front which remains the biggest concern for the future of the country and its economy. What is needed is a comprehensive anti-terrorism strategy and plan of action soon.

Related Links:

Haq's Musings

Foreign Investment Up, Load-shedding Down in Nawaz Sharif's First 100 Days

Pakistan to Beg and Borrow Billions More in 2013-14

Power Companies Profits Soar at Taxpayer's Expense

Does Nawaz Sharif Have a Counter-terrorism Strategy?

Pakistan's Tax Evasion Fosters Aid Dependence

Pakistan's Vast Shale Oil and Gas Reserves

Pak IPPs Make Record Profits Amid Worst Ever Load Shedding 

Global Power Shift Since Industrial Revolution

Massive Growth in Electrical Connections in Pakistan

Finance Minister Ishaq Dar's Budget 2013-14 Speech


Riaz Haq said...

Japanese companies see Pakistan as the second best market for business growth in Asia, according to JETRO as reported by Pakistan Today:

Pakistan has been ranked second in the world in terms of business growth in a survey conducted by the Japan External Trade Organisation (JETRO).

The current survey – which examined records of 9,371 Japanese firms operating across the world – put Pakistan just behind Taiwan in terms of business generated leaving behind both India and Japan, media reports said.

The JETRO has been conducting such surveys since 2013. Pakistan’s data was generated from 27 Japanese firms doing business here. The results found that 74.1pc of the Japanese companies estimated operating profit in 2013, allotting second rank to Pakistan only after Taiwan (81.8pc).

Compared to this, 60.7pc Japanese firms in China and 45.8pc in India made operating profit in 2013. If the survey is any guide, not only have a majority of the already present Japanese investors in Pakistan posed confidence in terms of guaranteeing business opportunities, they have also declared their intentions to expand their business.

Kohat Tunnel and Indus Highway are two noteworthy projects being carried out with Japanese loan. Likewise, second biggest loan of $ 34 million has been given in four years by Japan for coping with the power crisis.

A mega $ 2 billion project of Karachi Circular Railway is also on the horizon soon and will be a big boost in Japanese interests in Pakistan.

“Media’s voice is louder than the findings of our survey,” said Naoyuki Maekawa, senior coordinator for South Asia in JETRO.

JETRO has been urging Japanese investors to benefit from the conducive business environment in Pakistan.

There are more than 20,000 Japanese companies in China and over 1000 in India. There is an increase of 100 Japanese companies in India every year, said JETRO official. Apparently, China is a hot destination for investors but many want to pull out due to various laws.

“It is easy to invest in China and difficult to pull out,” said Yoshiji Nogami, former foreign minister of Japan and currently President of Japan Institute of International Affairs.

While Pakistani laws are more favorable for foreign investors, nevertheless the country has so far been able to convince only 70 Japanese companies for investment, majority of them in manufacturing sector, automobile industry in particular.

Not only they noted growth in their existing business, 70.4% Japanese investors in Pakistan forecast further improvement in their business during 2014.

Business confidence exceeds 40 points in Cambodia, Myanmar and Pakistan, JETRO’s survey found explaining the feedback collected from Japanese investors already doing business in the respective countries.

Riaz Haq said...

Here's an Express Tribune story on inflows into Pakistan Development Fund:

As the State Bank of Pakistan remains tightlipped over the source and purpose of funding, Pakistan received another tranche of $750 million in the newly-established Pakistan Development Fund (PDF), taking the total contribution to $1.5 billion so far.
Highly-placed sources told The Express Tribune that friendly countries have injected another sum of $750 million in the PDF – an account opened to channel money from abroad. The last tranche was received in February that stabilised the dwindling official foreign currency reserves.
It is the first time that any country has generously given $1.5-billion assistance to Pakistan within one month, as Islamabad never received such an amount as ‘upfront’ payments. The US, which remains the largest contributor, always gave amounts in tranches spreading over several years. Under its five-year, $7.5-billion Kerry Lugar aid package, Washington gave less than $2.5 billion in government-to-government assistance in over three years.
However, it was not clear whether the money received is a grant or depositary loans aimed at temporarily bailing out the country.
The officials, seeking anonymity, confirmed the receipts but none of the concerned government agencies came on the record.
SBP chief spokesman Umar Siddiqui did not respond to queries regarding receipt of the $750-million second tranche.
However, a statement issued by the Ministry of Finance, quoting Finance Minister Ishaq Dar, said, “The government of Pakistan has implemented concrete steps to improve the overall external position by ensuring substantial capital and financial inflows in the country.
“As a result, reserves have improved substantially in the last one month. This has been made possible by not only receiving larger inflows from multilateral and bilateral resources; but also through attracting forex flows through the capital markets and better home remittances.
“The forex reserves of the country have improved from $7.59 billion on February 7, to $ 9.37 billion on March 7. The efforts of the government have started to show positive results and are on track to deliver what we had announced earlier that our forex reserves will reach around $10 billion by the end of March.”
Dar’s statement also came on back of the rupee strengthening to Rs101 against the US dollar in the open market. However, the finance minister’s earlier claim, which he made last year that the dollar would be brought down to Rs98, still
remains elusive....

Riaz Haq said...

Morgan Stanley doubling of #Pakistan's weight in #MSCI index drives foreign inflows into #Karachi. BAHL, Lucky, PSO

MSCI has agreed to implement all proposed changes to the Frontier Market (FM)Index,  which  along  with  the  upgrade  of  Qatar  and  UAE  would  increase Pakistan’s weight to 8.88% from 4.29% currently.  
ƒ The changes will be implemented in 7 monthly phases, from May‐14 and will be completed by Nov‐14.  Pakistan’s weight would increase to 7.28% in May‐14 due 
to Qatar and UAE upgrade, whilst 8.86% will be reached over the next 6 months.  
ƒ Amongst specific stocks, there are 3 additions from Pakistan to MSCI FM, incl. BAHL, Lucky, and PSO.   
ƒ Although most frontier market funds are actively managed and off benchmark,such  a  sharp  weightage  increase  would  significantly  increase  Pakistan’s prominence on the frontier map, and should be a fillip for the equity market.

Riaz Haq said...

Here's an report on Pakistan's "power grid looking brighter":

Pakistan’s national energy grid will add more than a dozen power projects, including two dams and a coal mine, increasing electricity capacity in one of the worst shortages in the country’s history.

Pakistan’s power sector can generate about 16,000 MW, short of requirements by about 5,000 MW and worsening as demand grows, projected to swell to 26,000 MW by 2020, according to Pakistan’s 2013 National Power Policy report.
Capacity in some Pakistani industries, like the fertilizer industry, fell to nearly 50 percent in the last six months, forcing interruptions to gas supplies and closures. Importing expensive energy over the past few years, when the country had the capacity to produce it, has eroded Pakistan’s foreign exchange reserves.
Work is underway in advanced stages at Gaddani Power Project and two power projects at Bin Qasim, Pakistan Minister for Planning and Development Ahsan Iqbal told Parliament in Islamabad on Wednesday, Pakistan Today reported. He also said work has begun on Thar Coal Project, which includes a mining and three power projects that will begin producing electricity within three years.

China has agreed to ten power projects at Thar, Iqbal added. Chinese banks offered to finance up to $900 million of the $1.2 billion for the Thar coal in December, asking the Pakistani government for a loan guarantee. London-based Oracle Coalfields, the owner and developer of the coal plant project, expects to finalize detailed agreements with two Chinese partners, CAMCE and SEPCO, by the end of the year.
Two hydroelectric projects, the Diamer-Bhasha and Dasu dams, will also help lift Pakistan from its energy shortage and usher in economic progress, analyst Nasir Jamal told Radio Pakistan Thursday.'s-power-grid-looking-brighter-278179

Riaz Haq said...

Pakistan's KSE-100 shares index crosses 30,000 mark to set new record

KARACHI: The long-awaited moment for the stock market arrived on Thursday when the KSE-100 index performed the incredible feat of crossing comfortably over the 30,000 points level.

The ravaging bulls tossed the index up by 400.94 points or 1.35 per cent to 30,177.11. The volume also jumped 83pc over the previous day to 206 million shares.

The immediate trigger for the bulls was provided by the global rating agency Moody’s upgrade of outlook for Pakistan’s economy to ‘stable’ from ‘negative’. It was sweetened further by the rating agency’s outlook on five Pakistan banks to ‘stable’ from ‘negative’.

All five banks were major gainers on Thursday with ABL up by Rs5.87; HBL by Rs3.66; MCB by Rs5.41; NBP by Re0.69 and UBL by Rs8.35. Elsewhere, PSO rallied by Rs7.67 and Lucky Cement advanced by Rs15.93. Brokers said that cement shares were powered by expectations of healthy June results.

Most market gurus admit that foreign investors have been the engine that drove the market to its all-time high. On Thursday, foreign funds bought equity worth $6.44m, which raises the total inflow to $33.7m only during the first three weeks of July.


Mohammad Sohail, CEO at Topline Securities, observes: “After increasing by 49pc in 2012 and again 49pc in 2013, local market index is up 19pc in this calendar year to date.”

He pointed out that in the last two and a half years, the index had shot up from 11,000 points to reach 30,000 led by “foreign flows, smooth political change and recent signs of economic recovery.”

Khurram Schehzad, chief investment officer, Lakson Investments, pointed out that the Pakistan bourse had benefitted from increase in weight in the MSCI Frontier Market index which elated Pakistan to third place, after Kuwait and Nigeria.

He observed that since January 2012 when the market first picked up momentum, foreign inflows into the Pakistan market amounted to the tall order of $826m.

Riaz Haq said...

#Pakistan Minister Ahsan Iqbal claims 3,600 MW #electricity will be added in May 2017 to cut #loadshedding #CPEC

Minister for Planning, Development and Reforms, Ahsan Iqbal on Monday said some 3,600 megawatt (MW) electricity would be added to the national grid by next month, which would help reduce energy shortfall in the country.
Addressing a press conference here, he said total 10,000 MW electricity would be added to the grid by May 2018 bridging total gap in demand and supply.
He said the Pakistan Muslim League-Nawaz (PML-N) government had made record investment in the energy sector. Such investment had not been seen in the sector for the last 15 years and production of only 16,000 megawatt electricity was made possible during 66 years. After completion of projects, uninterrupted power supply would be available, which would start a new of era of development in industry, agriculture and services sectors, he added.
Responding to the criticism that the present government could not manage to overcome the energy crisis despite lapse of four years, the minister said energy projects took three to four years to complete. The projects initiated by the PML-N government were near completion and would soon start commercial operations, he added.
He said since the PML-N government came into power, the economic indicators were on the upward trajectory. “Economic growth has gone up to over 5 per cent in 2016 from 3.7 per cent in 2013, inflation rate has come down and industrial growth rate is improving,” he added.
He said the government was focusing on manufacturing high cost commodities instead of low cost ones, therefore, during last three years the export of former had increased.
To a question, he said though the public debt had increased, yet the debt to GDP (gross domestic product) ratio decreased to 60.5 per cent in December 2016 against 62.4 per cent in December 2015.
The minister said the opponents of China Pakistan Economic Corridor (CPEC) were trying to mislead the people that the project would increase the public debt and damage the local industry. In fact, it would help strengthen the country’s industrial sector, he added.
“Huge number of employment opportunities will be created for the local people as Chinese industries are being shifted to Pakistan,”, he said, adding that the Pakistani industry would also become more competitive.
He said due to the CPEC, Pakistan’s economy was now shifting from low cost agriculture industry to high value industrialization. Major development projects, which had been pending for decades, were now at the completion stage, he added.
He said the government had completed the long awaited N-85 connecting Quetta with Gwadar. It would construct over 1,000 kilometer roads across the Balochistan province, he added.
It was the current government that made the long awaited Diamir Bhasha Dam project a reality as its ground breaking was going to be held in a few months, he added.
Ahsan Iqbal rebutted an allegation levelled by scientist Dr Samar Mubarak against the government of fixing tariff rate of Rs 24 per unit of electricity produced from Thar Coal. The traiff was fixed at only Rs 8.5 per unit, he added.—APP