Thursday, August 27, 2015

Top Global Fund Manager Mark Mobius is Bullish on Pakistan

Joseph Mark Mobius of Templeton Emerging Markets Group sees "many reasons for a brighter future for Pakistan".  Mobius, armed with B.A. and M.S. degrees in Communications from Boston University, and a Ph.D in economics from MIT,  is a top global fund manager with a good track record of investing in emerging markets.

In a blog post titled "Building Corridors to the Future in Pakistan", an obvious reference to China-Pakistan Economic Corridor (CPEC), Mobius says he and his team "have been investing in Pakistan for a number of years, and see it as an overlooked investment destination with attractive valuations due to negative macro sentiment". It should be noted that Karachi Stock Exchange listed companies' average price-earnings multiple of just 10 is less than half of regional markets such as Mumbai with PE ratio of over 20.

Source: Bloomberg

In addition to new foreign investment in CPEC and low PE ratios, Mobius offers the following key reasons for his bullish outlook for Pakistan:

1. The Pakistani stock market has been one of the top-performing markets in the last five years (ended June 2015).

Source: Economist Magazine
2.  The MSCI Pakistan Index has more than doubled with a 129% return during that time frame, compared with a 45% return for the MSCI Frontier Index and 22% increase in the MSCI Emerging Markets Index in US dollar terms.

3. Even after KSE-100 strong performance, valuations of Pakistani stocks still remain relatively attractive. As of end-June 2015, the trailing price-to-earnings ratio of the MSCI Pakistan Index was 10 times, versus 11 times for the MSCI Frontier Index and 14 times for the MSCI Emerging Markets Index.

4. Pakistan government efforts on expenditure control and divestments have been positive, but the government will need to remain committed to the economic and structural reform program.

5. An internal anti-terrorism drive was made in the wake of the tragic Peshawar incident in December 2014, which targeted schoolchildren. Mobius thinks these efforts need to be maintained over the longer term to develop a better security climate for businesses and the society as a whole.

6. In the political environment, delays in the implementation of reforms or deterioration in the political or security situation could adversely impact the country’s macroeconomic development and fiscal position, hinder investment and weaken investor confidence.

Bottom line for Mobius: Despite a number of ongoing challenges, there are "many reasons for a brighter future for Pakistan".

Related Links:

Haq's Musings 

Time to Go Long on Pakistan?

China Deal to Set New FDI Records in Pakistan

Post Cold War Realignment in South Asia

Haier Pakistan to Expand Production From Home Appliances to Cellphones, Laptops

Pakistan Bolsters 2nd Strike Capability With AIP Subs

3G, 4G Rollout in Pakistan

Pakistan Starts Manufacturing Tablets and Notebooks

China-Pakistan Industrial Corridor

US-Pakistan Ties and New Silk Route


Unknown said...

Besides the $46 billion CPEC China is financing $50 billion in hydro electric projects.....but nobody is talking about it

Anonymous said...

Can you compare the economies of Pakistan, India and Bangladesh?
It's population, poverty levels, gdp, per capita income, education, foreign exchange reserves, debts, healthcare, infant mortality, female infanticide, trade balance, fiscal deficit, etc

Jan said...

Very informative.

Pakistan is by and large an undervalued economy because of negative global perception. Once the cloud of bad image fade away only then we will be seen as investment destination around the world..

Anonymous said...

Just would like to ask you few things. Maybe you could open another thread on this sibject sometime. I was reading that Pak tax colection is 0.5% and the Indian is near 4%. What I was wondering is do this skew the percapita of each country?

Riaz Haq said...

Anon: "Just would like to ask you few things. Maybe you could open another thread on this sibject sometime. I was reading that Pak tax colection is 0.5% and the Indian is near 4%. What I was wondering is do this skew the percapita of each country?"

Total tax-GDP percentage in Pakistan is 9%. It's 12% in India.

Riaz Haq said...

As global crude prices showed some recovery, the stock index on Thursday grew on the back of gains in oil shares.

Additionally, a relief from the regional downturn made investors more relaxed with small and medium caps experiencing increased investor participation.

Cement stocks also dominated the charts as news of the Asian Development Bank (ADB) agreeing to fund projects provided vital support. Other stocks that showed recovery were from fertiliser and pharmaceutical sectors.

At close, the Karachi Stock Exchange’s (KSE) benchmark 100-share index recorded a rise of 1.26% or 423.87 points to end at 33,961.29. Elixir Securities analyst Faisal Bilwani said Pakistan equities shared the joy in regional markets and closed just shy of 34,000 points as index-heavy oil shares continued to find fresh interest.

“The wider market opened positive tracking regional markets and gains were gradually added as the day progressed on local institutional flows in index names,” said Bilwani. Small and medium caps experienced increased participation from retail and other investors.

Midday comments by Finance Minister Ishaq Dar about the rupee value and confidence in economy and capital markets helped sustain the gains, he said.

JS Global analyst Ahmed Saeed Khan said following the rally in global equity markets, the KSE-100 index also extended gains to hit an intraday rise of 1.4%. “Khan said local investors looked keen on the cement sector in the wake of ADB’s announcement of new projects. “Biggest gainers in the sector were Maple Leaf Cement (+5%), Cherat Cement Company (+3.7%) and DG Khan Cement (+2.3%).”

Trade volumes fell to 223 million shares compared with Wednesday’s tally of 278.69 million shares.

Shares of 378 companies were traded. At the end of the day, 258 stocks closed higher, 102 declined and 18 remained unchanged. The value of shares traded during the day was Rs10.8 billion.

Pace Pakistan was the volume leader with 15.8 million shares, gaining Rs0.66 to finish at Rs7.23. It was followed by Jahangir Siddiqui and Company with 13.7 million shares, gaining Rs1.06 to close at Rs24.71 and K-Electric Limited with 13.1 million shares, gaining Rs0.07 to close at Rs7.71.

Foreign institutional investors were net sellers of Rs516 million worth of shares during the trade session, according to data maintained by the National Clearing Company of Pakistan Limited.

Majumdar said...

Prof sb,

I am glad that Mark Mobius and Chris Robertson are bullish about Pakiland- but are they putting money where their mouth is. How much are Templeton and Renaissance Capitals investments in Pakiland?


S Khan said...

Sir, can you share how you have personally bought shares in Pakistani companies and the return on investment? I haven't come across anyone who individually buys stocks directly in the country. I know about mutual funds but they invest only a small fraction, if at all, in Pakistan. Templeton Fund is very diversified.

Riaz Haq said...

S Khan: "can you share how you have personally bought shares in Pakistani companies"

I own Pakistani shares through Pakistan ETF (PAK), Frontier Markets ETF (FM) and several mutual funds that invest in Asian markets including KSE.

S Khan said...

PAK ETF started in april 2015 at 15.46 but today it is 14.76 so you are down 4.7% plus brokerage fees? Sir, I like to invest in Pakistan using 401k but not like that. MSCI Frontier ETF has 10% in Pakistan which returned 7% minus brokerage fee since it started 08/2012. My Vanguard Total Stock Market in 401k gave me 12% from 08/2012. I want to know from you how are you getting good returns? Thanks

Riaz Haq said...

S, Khan:

PAK ETF is too early to judge. But looning at the last 5 years, Pakistan MSCI index has far exceeded both developed and emerging market indices. Just look at the chart in the post,

Sahil said...

@S Khan

I would advise you to stay put with your Vanguard Fund in your 401(k). Maybe you can add Vanguard International Index Fund to that for balance purposes. No offense to Mr Haq but I think his article is more about Pakistan-India and less about investment strategies. When you mentioned 401(k) I think about two things: your hard earned money and money when you retire. Pakistan MSCI is too narrow with high risk and volatility. Ultimately, it is unto you.

Riaz Haq said...

Pakistan's ambassador to the UN Maleeha Lodhi has invited the American business community to the country, which she said offers "the most investor-friendly policies in the (South Asia) region", media reported on Saturday.

Speaking before New York's Nasdaq bell ringing ceremony on Friday to mark Pakistan's 69th Independence Day, Lodhi said, "Pakistan's strategic location gives it a pivotal role in promoting regional connectivity," Dawn reported.

On the China-Pakistan Economic Corridor (CPEC), she informed the business leaders that "plans are under way to make Pakistan a regional economic hub, providing trade, energy and communication corridors linking Central Asia to South and Southwest Asia and beyond".

"Pakistan today has a functioning democracy, an independent judiciary and a free and lively media," she mentioned.

The ambassador observed that the country's economy has "staged an impressive recovery while our security situation is improving by the day".

"Pakistanis are not only making a mark in their countries of adoption but sending back remittances which are at a record level today," she added.

Riaz Haq said...

In #Pakistan, a prime minister and a country rebound — at least for now. #Nawazsharif #PMLN #ZarbEAzb #PakistanArmy

One year after he was nearly bounced from office, Pakistani Prime Minister Nawaz Sharif has hung on amid signs the country could be on the cusp of a surprising turnaround.

After years of terrorist attacks, military coups and political upheaval, Pakistan for now has settled into a period of relative calm. Over the past nine months, government statistics show, major terrorist attacks have declined 70 percent, and Pakistanis are flocking back to shopping malls, resorts and restaurants.

The relaxed and optimistic mood here is benefiting Sharif politically, despite the humiliation he faced a year ago when he had to cede a chunk of his power to Pakistan’s military. Still, the arrangement is allowing Sharif to do something that Pakistani leaders have struggled to accomplish for much of the past decade: implement a road map for what a peaceful, stable Pakistan could look like. And in the process, Sharif is winning over skeptics despite his low-key leadership style.

“People are feeling more secure. There are development projects, and the perspective of people is changing to say, ‘Okay, now we can see things are going well,’ ” said Zafar Mueen Nasir, dean of business studies at the Pakistan Institute of Development Economics. “Of course, there will always be some criticism and always a second opinion, but as far as I am concerned, this government is at least showing some progress.”

Last summer, after Sharif’s first year in office was marked by disputes with political rivals and the country’s powerful military, tens of thousands of protesters camped out near his mansion, demanding his resignation. At the time, there was widespread speculation that military leaders were considering a coup to oust Sharif over his diplomatic outreach to Pakistan’s arch rival, India.

But as Islamabad slipped into an unusually chilly fall, Sharif outlasted the protesters. To remain in office, he reportedly had to make significant concessions to military commanders, including giving them full authority to make major decisions related to government policy toward Afghanistan and India.

Now, despite his reduced power, Sharif has turned his attention toward trying to rebuild a chronically sluggish economy while also delivering shiny new amenities for residents.

It’s a strategy that has become easier to implement this year, as a military campaign in Pakistan’s tribal belt and its largest city, Karachi, has been credited with reducing terrorist attacks and other crimes.

In the first eight months of this year, 680 civilians have been killed in terrorist attacks, compared with 1,194 in the same period last year and 2,246 in 2013, according to the South Asia Terrorism Portal, which monitors violence in the region.

[Pakistani military says it achieved major victory in mountain assault]

A rapidly growing country of 180 million, Pakistan has plenty of obstacles to overcome.


Pakistan’s bare-knuckled political system also remains unsettled. Sharif, who still has 2 ½ years remaining in his term, will continue to face relentless challenges from political foes eager to exploit the next crisis.

But in recent months, speculation about a civil war or an economic collapse has died down. Instead, credit agencies are boosting Pakistan’s bond ratings and large investment firms are advising clients to take a second look at opportunities here.

“It is the best, undiscovered investment opportunity in emerging or frontier markets,” Charlie Robertson, London-based chief economist at Renaissance Capital, told Bloomberg News in late June.

The International Monetary Fund, which has extended a $6.2 billion loan, released a report last month crediting Pakistan for its 4.1 percent growth in gross domestic product this year, with a bump up to 4.5 percent projected for next year.

Riaz Haq said...

#Pakistan has its share of troubles, but its economic successes tell another story … via @TheNationalUAE

The MSCI Pakistan Index has returned 9.3 per cent a year over a five-year period. In comparison, the MSCI Emerging Markets Index offered 0.6 per cent returns over the same period and the Frontier Index 1.6 per cent (all in US dollar terms).

Goldman Sachs has ranked Pakistan among the Next 11, along with Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, the Philippines, Turkey and Vietnam. The N-11 is its selection of high-potential, high-population countries beyond the Brics group.

Pakistan’s economy has grown by an average of 5.4 per cent a year since 2010, reaching US$247 billion last year. Goldman Sachs estimates that it could reach $2.1 trillion by 2050.

This is the other side of Pakistan’s story – the country’s ability to defy sceptics and keep growing its economy despite violence and political uncertainty.

Pockets of resilience and economic success are increasingly visible in the country. Civic hacking, for example, is a global movement gaining traction in Pakistan.

“The way civic hacking works is: you see a problem, you know there is a data set to solve it – it’s just that someone has yet to make that connection,” explained Ali Raza, an entrepreneur who runs a game studio.

Mr Raza is manager at one of the civic hacking movement’s successes – the KP Civic Innovation Fellowship Program. Pakistan’s KP province is more frequently known for bearing the brunt of the past decade’s war. Yet it is taking progressive steps – the government hosts this fellowship programme in a three-way partnership with the World Bank and Code for Pakistan. Given the pilot’s success, the government agreed to host 20 fellows this year, up from 12 last year.

“It’s a big enough deal that the government understood this positive take on the term ‘hacking’,” said Mr Raza.

This collaboration is among the successes mentored by the KP Civic Innovation Fellowship Program.

“Three out of five applications that came out of the first fellowship batch alone have been adopted or sustained in some form,” said Sheba Najmi, the founder of Code for Pakistan.

An app that came out of the Islamabad Hackathon, QDews (Quick Disease Early Warning System), slashes outbreak detection time from 2.5 weeks to one day, with the potential to increase response time by 94 per cent.

“The fellowship is so exciting because all these government departments are now welcoming the citizens in,” said Ms Najmi, a Stanford graduate.

Over the past decade Pakistan has also had a surge in social enterprises. Built by entrepreneurs who watch their social bottom-line as closely as their financials, these enterprises target market gaps ranging from natural, lower-priced construction insulation to more inclusive education.

For example, Ansaar Management Company (AMC) is a for-profit social enterprise that has built vibrant low-income housing communities across the country – both urban and rural.

AMC is engaging foreign investors in a space that does not cross most minds, said Jawad Aslam, the company’s chief executive and founder.

Catering to the US$95-235 per month income household, the company’s models are filling a housing gap so far only filled by katchi abadis, or informal slums. Four thousand people now live in AMC’s four bustling multi-faith communities, which were launched in 2008. Three more are underway.

The State Bank and House Building Finance Corp have partnered with AMC to reduce mortgage payments and provide financing for the poor.

Riaz Haq said...

#Pakistan Central Bank Cuts Interest Rate to 6% to Bolster Economic Growth via @business

Pakistan cut its benchmark interest rate as the central bank seeks to encourage economic growth amid falling oil prices.
Governor Ashraf Mahmood Wathra lowered the target policy rate to 6 percent from 6.5 percent, the State Bank of Pakistan said in a statement on its website on Saturday. The move was predicted by 11 of 21 economists in a Bloomberg survey, with the rest seeing no change. The country also cut its discount rate to 6.5 percent from 7 percent.
“For another year and a half we don’t see rates bouncing back unless oil bounces back,” Mohsen Siddiqui, portfolio manager at Abbasi Securities Pvt., said by phone from Karachi before the decision. “So far we see downward volatility in oil prices.”
Brent crude has tumbled about 50 percent over the past year. Pakistan’s exports fell in August for the fourth straight month, imperiling Prime Minister Nawaz Sharif’s goal of spurring economic expansion to the fastest since 2008.
“Recent increases in gas prices and their likely second round impacts would be offset by lower global oil price that has yet to find the bottom,” the central bank said in its statement.
Pakistan raised the price of natural gas this month for different industries to lower subsidies and meet the terms of an International Monetary Fund loan. The largest gas-price increase was a 63 percent surge for some fertilizer manufacturers, Oil Minister Shahid Khaqan Abbasi said in August.

Riaz Haq said...

Credit Suisse positive on #Pakistan - Ali Naqvi, Head of Equities #Asia Pacific, Credit Suisse | Business Recorder …

Commenting further on Pakistan's economic outlook, Naqvi brimmed with confidence saying, "I see the glass more than half full". Part of his optimism is driven by the oil price slump which in Naqvi's word "is certainly a blessing for an oil importing country like Pakistan".

"Even if the oil price goes up, we do not expect it to touch $80-100 per barrel anytime soon. Crude oil priced anywhere at or under $70 a barrel is comfortably manageable for Pakistan," added Naqvi. For the oil price to go up drastically, the Chinese economy, in his opinion, would have to show promising growth. "Oil goes up if China goes up by 9 percent and that seems unlikely at the moment. So the oil price could well stay on the lower side which is to Pakistan's advantage".

Consumer driven growth is what Naqvi believes will continue to underpin growth in Pakistan. "The consumption trends are encouraging. With incomes improving, people are spending more and that creates whole avenues for growth," However, Naqvi delivered the optimism with a word of caution on the long-term sustainability of growth; "Pakistan's biggest risk today is the lack of any globally competitive industry or sector. The country needs to devise policies allowing it to become globally competitive in at least a few industries and sectors. Naqvi was particularly positive on the progress in the energy sector.

While some out there may think that the sector has not seen any improvement, Naqvi thinks otherwise. "Yes, the problems are huge, but the focus for the first time is on the right areas. Results will take time to come, but the plans in generation, distribution and governance areas seem well placed and have sent a positive signal". That said, Naqvi added that the progress has been rather slow, but quickly added that "there is progress nonetheless".

Without commenting on specific sectoral preference, Naqvi reiterated his overall liking for anything that has a consumer play. On Pakistani stock markets' regional standings he said the discount is still there but that can turn into an opportunity. "Pakistan trades at a roughly 40 percent discount to the regional markets". Such is the variation in multiples that India trades at two times the multiple of Pakistan, whereas China is at par with Pakistan.

Quizzed over his thoughts on Pakistan's banking sector, Naqvi said, "Banks perform in cycles and with the government not crowding out the market, banks will have to start lending to the private sector more aggressively, at some point. They have already started entertaining 'riskier' borrowers. They have no choice but to lend to the private sector as competition will be stiffer by the day and new technologies pose the biggest threat to banks, especially the more complacent ones".

Concluding the conversation, Naqvi said, "Consumer empowerment through technology (a global phenomenon) and domestic consumption are the key growth drivers and luckily both are happening at the same time for Pakistan". His final verdict on Pakistan was that Credit Suisse's view on Pakistan is positive, without any caveats." Pakistan's market is in serious danger of becoming mainstream again", he quipped.

Riaz Haq said...

Seeking Alpha: The Global X MSCI #Pakistan ETF (NYSEARCA:PAK) is an excellent value pick …

The Global X MSCI Pakistan ETF (NYSEARCA:PAK) is an excellent value pick, and a closer examination of Pakistan's economy, stock market, and political risk all verify that the soon to be an emerging market, Pakistan, has an excellent investment climate. The fund's P/E ratio is currently 9.12, which is low for Pakistan, and is also lower when compared to other ETFs in frontier and emerging markets. The ETF was just created this year and its price has consistently been between 14.00-16.94.

Pakistan's stock market has risen substantially since 2012, yet valuation is still extremely low.

Pakistan's stock exchange has had substantial performance with a YTD return of 8.87%, and a 1-year return 21.18%.

Terrorism has been decreasing substantially in Pakistan, according to a report released by the Department of State.

Inflation has recently improved from the high levels consistently experienced between 2010 and 2014.

Certain industries have displayed substantial growth, such as the cement industry, which grew by 57% this year.

Riaz Haq said...

The S&P BSE Sensex is down over 4,000 points from the highs it hit in March. The index has already wiped out all the gains made in 2015, down nearly 7 per cent, weighed down by both global as well as domestic factors.

Domestic factors such as weak GDP growth in April-June, a slowdown in manufacturing output, below-average monsoon and weak corporate earnings growth have weighed on sentiments.

Read more at:

Riaz Haq said...

#Pakistan Auto industry shows robust growth despite chronic energy, tax, labor woes - Nikkei Asian Review

KARACHI, Pakistan -- This country's auto industry has seen sharp increases in production and sales lately, following a long period of doldrums since their previous peak in 2007. This shows that the sector is well ahead of other industries in taking advantage of the country's burgeoning economic recovery. But Japanese automakers operating here continue to face tough challenges, including chronically unstable power and gas supplies, a shortage of skilled workers, and the negative impact of the tax system on their sales.

In April, Japanese motorcycle manufacturer Yamaha Motor resumed assembling motorcycles in Pakistan for the first time in seven years at its new factory in the Bin Qasim industrial park in the outskirts of Karachi, Pakistan's commercial hub. The new assembly line is turning out Yamaha's new YBR125 sport bike, equipped with higher-end features, such as an electric starter and cast wheels. The YBR125, a top-of-the-line model from Yamaha, costs approximately 129,000 rupees ($1,238), roughly double the average price for the 70cc models that are the most popular in Pakistan. The company expects the model's first year shipments to reach 30,000 units. Yasushi Ito, managing director of Yamaha Motor Pakistan, said the company aims to produce up to 400,000 units annually by 2020.

Hirofumi Nagao, managing director of Pak Suzuki Motor, a Pakistani subsidiary of Japanese automaker Suzuki Motor -- which holds a 54% share of the domestic automobile market -- said: "The Pakistani rupee is holding steady, inflation has calmed down and auto loan rates have dropped to 11% per annum after climbing to around 20%. If loan rates fall below 10%, it will help boost sales significantly."

Output at Pak Suzuki is likely to surpass 130,000 units and reach an all-time high this year, thanks in part to "special demand" from the Punjab state government, which has ordered from Pak Suzuki 50,000 cabs under its taxi scheme to boost employment in the province.

Indus Motor, a joint venture between the Habib group, one of the leading business groups in Pakistan, and Toyota Motor, registered sales of over 57,000 units in fiscal 2014, up 70% from the previous year, thanks to brisk sales of a new Corolla model.

Riaz Haq said...

Business confidence soaring in #Pakistan: LCCI-LSE report via @ePakistanToday

Business confidence in Pakistan has soared in 2015 as both the investments and revenues registered have surged during this period. It is revealed in the LCCI-LSE business confidence report launched on Thursday at the Lahore Chamber of Commerce & Industry.

LCCI President Ijaz A Mumtaz, former presidents Bashir A Baksh, Mian Muzaffar Ali, Rector Lahore School of Economics Shahid Chaudhary, Dean of Economics Faculty Dr Azam Chaudhary and LCCI executive committee members were present on the occasion.

LCCI President Ijaz A Mumtaz said that one could not find a solution to the problem until and unless correctly identified, therefore, the Lahore Chamber of Commerce & Industry decided to conduct a detailed survey in collaboration with the Lahore School of Economics and prepared a “LCCI-LSE Business Confidence Report” after months long exercise.

The LCCI-LSE business confidence report says that “a significant number of firms in the manufacturing sector said that their export sales increased over the last year and they expected it to increase again in 2015. A majority of firms said that investment increased over the last year and the largest increase in investment in 2014 came in the manufacturing sector where around 70 per cent of firms were able to increase their investment. Across all firms, the increase in investment in 2014 was not financed by bank borrowing but by the enhanced sales revenues. More than 60 per cent firms in the manufacturing and services sectors plan to increase their investment in 2015. A significant majority of firms do not plan to utilise bank borrowing for financing their higher levels of investment in 2015. A significant proportion of manufacturing and service sector firms managed to increase their number of employees in 2014 and both these sectors seem optimistic about further increase in their employment level in 2015. There was significant optimism when firms were asked about their expectations about Pakistan’s economy, with approximately 50 per cent of the firms expecting the economy to do better in 2015. Access to finance was considered shortage of skilled labour to have a major impact on business and this proved to be a key issue for the manufacturing and services sectors.”

Riaz Haq said...

#Pakistan to offer $1b Eurobond this week |

Cash-strapped Pakistan will raise at least $1 billion (Dh3.67 billion) from international debt markets in the next two days by Eurobonds offerings, a media report said on Wednesday.

Finance Minister Ishaq Dar during his visit to the US will lead the Pakistani team to launch a Eurobond.

Pakistan has opted the easier but more expensive path of capital markets financing rather than implementing tough but necessary energy sector reforms and accessing the much cheaper financing available from international aid agencies, The Express Tribune reported.

“The bond will be priced on September 24 and is being underwritten by Citibank, Deutsche Bank and Standard Chartered Bank, which were appointed less than three weeks ago,” it said.

The Eurobonds are expected to be of either five or 10-year maturities, or possibly both.

Based on the last issue, the interest rate is likely to be in the 7 per cent range.

By comparison, had the government implemented energy sector reforms, the country would have availed the same amount from the World Bank and Asian Development Bank (ADB) at a 2 per cent interest rate for a period of 25 years.

The launching of the Eurobond, the third global issue in less than two years, highlights the government’s lack of commitment to structural reforms hampering economic growth, according to independent economists.

Although, the government had included $1 billion Eurobond in its annual budgetary estimates, it advanced the calendar and also decided to issue the sukuk.

International lenders’ refusal to extend USD 1 billion in budgetary support before end of this month heightened the urgency to try luck in international debt markets.

The World Bank (WB), ADB and Japan have withheld approval of $1 billion loan after they questioned the government’s commitment to reform the ailing energy sector.

The government’s inability to implement promised reforms led to delay of approval of the loan, which was originally planned for April this year.

Under the Development Policy Credit-II, the WB was supposed to give USD 500 million in loan, the ADB $400 million loan and Japan $100 million in grant.

Earlier, in March last year, the government raised $2 billion by floating five and ten year dollar-denominated bonds at interest rates ranging between 7.25 per cent and 8.25 per cent.

In the second attempt, the government issued five-year $1 billion Ijara-Sukuk bonds at 6.75 per cent.

Riaz Haq said...

#Pakistan hopes to raise $1B with Eurobond via @frontiermarkets

Pakistan is set to issue a Eurobond this week, the finance ministry said, with one government official estimating on Wednesday that the bond could raise “around $1 billion” in a bid to boost the country’s financial position.

The bond, whose final pricing is scheduled for Thursday, is part of the government’s plans to lift Pakistan’s economy, which include bolstering foreign exchange reserves through divestments from and privatization of state-run enterprises, improvement of infrastructure and structural reforms.

“The minimum to be raised is $500 million, but based on the interest so far, we’re…looking at around $1 billion,” a senior finance ministry official said. The official asked not to be named because he was not authorized to comment on the matter. Finance Minister Ishaq Dar traveled to New York for the bond’s final roadshow on Wednesday.

Officials at the Finance Ministry declined to offer further details about the issue, including tenor and yield. The country’s foreign exchange reserves stood at $18.73 billion on September 11, according to the State Bank of Pakistan.

Moody’s assigned a (P)B3 rating last week to the bond offer, with a stable outlook, citing Pakistan’s “moderate economic strength with a supply-constrained economy that has been resistant to structural change.”

The agency added that the country’s weak fiscal position, the risk of political instability, and structural problems, especially in the power sector, are among the major factors that determined the bond rating.

Prime Minister Nawaz Sharif’s government has said that it plans to improve Pakistan’s power sector through reform and investment to boost growth, and hopes to end chronic power shortages that have crippled the economy for years. Power and transportation are the key elements of a $46-billion Chinese infrastructure investment plan unveiled earlier this year, which aims to create an economic corridor linking China with Pakistan.

The government’s GDP growth target for 2015-16 is 5.5%, up significantly from 4.24% in the previous year. The International Monetary Fund said last month that it expects a 4.5% growth for this fiscal year.

Pakistan returned to the global bond markets last year in April after a seven-year break, raising $2 billion. Later in 2014, it raised another $1 billion through an Islamic bond issue.

Riaz Haq said...

The Asian Development Bank (ADB) has lowered its projection of GDP growth rate for Pakistan at 4.5 percent compared to officially envisaged target of 5.5 percent for the current fiscal year 2015-16.

However, the ADB projected slashing down inflationary pressures as it would come down to 5.1 percent for ongoing financial year. According to Asian Development Outlook (ADO) for 2015-16 released by the ADB on Tuesday, stating that inflation is now expected to be slightly higher in FY2016 than in FY2015 as oil prices recover. The ADB’s update sees lower inflation standing at 5.1 percent than forecast earlier of 5.8 percent, but inflationary pressures may come from food prices pushed higher by possible supply shortages following floods in July 2015. Monetary policy is expected to remain supportive.

About GDP growth rate, the ADB states that it is expected to edge up to 4.5% in FY2016, assuming continued low prices for oil and other commodities, the expected pickup in growth in the advanced economies, and some alleviation of power shortages.

Prospects for large-scale manufacturing remain subject to progress on power supply, the ADO stated. “Plans to build an economic corridor linking Kashgar in the People’s Republic of China to the Pakistani port of Gwadar were announced in April, and this mega project could significantly boost private investment and growth in the coming years,” the ADO further states.

Provisional GDP growth in FY2015 (ended 30 June 2015) matched the ADO 2015 forecast and stood at 4.2 percent. It was led by services as growth in manufacturing slowed. Industrial growth was hobbled by a slowdown in large-scale manufacturing to 3.3% owing to continued power shortages and weaker external demand. The resilience of small-scale manufacturing and construction sustained industrial growth at 3.6%. Agriculture growth remained modest at 2.9%. Private fixed investment slipped to equal 9.7% of GDP from 10.0% a year earlier because of continuing energy constraints and the generally weak business environment that has depressed investment for several years.

Headline inflation sharply declined in FY2015 and improved on the ADO 2015 projection. Inflation for both food and other items dropped significantly, reflecting adequate food supplies and the transmission into prices of lower global prices for oil and other commodities. The current account deficit narrowed in FY2015 from 1.3% in FY2014. The reasons were lower oil imports (which had been 35% of the total), larger inflows under the Coalition Support Fund, and robust workers’ remittances.

Riaz Haq said...

#Pakistan's #KSE100 surges 1.12 pct in 4th bullish session | Business Standard News …

Pakistan's Karachi Stock Exchange (KSE) ended the week with fourth bullish session on the trot on Friday as investors bought fresh positions amid reports positive trade in international markets.

Japan's Nikkei surged by 1.64 percent or 297.50 points, Hong Kong's Hang Seng Index gained 0.46 percent or 103.89 points, whereas China's SSE Composite Index increased by 1.27 percent or 39.79 points on Friday.

Pakistan's benchmark KSE 100-Index skyrocketed by 1.12 percent or 374.03 points to 33,843.18 points on Friday when compared with 33,469.15 reported on Thursday.

During the four-day bullish run, the key Pakistani index has accumulated 1,058.24 points. During the week that ended October 9, the main index surged by 873.45 points as four out of five trading sessions ended in green zone.

The KSE All Share Index swelled by 1.15 percent or 268.16 points to 23,673.77 points, the KSE 30-Index augmented by 1.43 percent or 288.09 points to 20,383.82 points, whereas the KMI 30- Index ballooned by 1.47 percent or 833.91 points to 57,529.52 points.

During Friday's trading session, the key index moved in a range of 490.83 points as it hit an intraday high of 33,959.98 points as against an intraday low of 33,469.15 points.

Market volumes sized up by 38.89 percent or 69.696 million shares to 248.919 million shares on Friday when compared with trading of 179.222 million shares posted on Thursday.

During the week that ended on Friday, the top Pakistani bourse witnessed total volume of 875.514 million shares at average daily turnovers of 175.102 million shares.

Market capitalization improved by 1.14 percent or 81.422 billion rupees ($782.911 millions) to 7.233 trillion rupees ($69.555 billion) while trade value jumped by 41.19 percent or 4.050 billion rupees ($38.951 million) to 13.886 billion rupees ($133.522 million).

Among 399 active scrips on Friday, prices of 263 issues advanced, 110 declined, whereas values of 26 other companies stayed unchanged for the week.

Fauji Cement XD, Maple Leaf Cement, and TRG Pakistan Limited were the top traded companies with turnovers of 18.746 million shares, 16.895 million shares, and 15.677 million shares, respectively.

Island Textile was the top price gainer with increment of 43.60 rupees (41.92 cents) to 917.49 rupees ($8.82) while on the flip side Indus Dyeing led the major price shedders with decrement of 55.77 rupees (53.62 cents) to 1,059.73 rupees ($10.18).