Friday, October 14, 2016

Investors Ignore Modi's Threats & Drive Pakistan Shares to New Highs

Indian Prime Minister Narendra Modi's threats of war and Pakistan's isolation have failed to deter investors as KSE-100 index made new highs this week.  The key index of Pakistani shares closed at an all time high level of 41,412.04 points this week. Pakistan shares index has continued to outperform all regional and emerging market indices over the last 5 years.

Modi's Threats:

First came "boli nahi, goli"  (Bullets, not talks). Then came "chappan inch ki chhaati" (56 inch chest, 44 actual according to Modi's tailor) and "Munh tor jawab (Jaw-breaking response) followed by threats of isolating Pakistan and claims of surgical strikes across the line of control in Kashmir.

Investors ignored all of Modi's bluster as just rhetoric and drove Pakistani shares to a new all-time record.
Source: Faseeh Mangi Bloomberg News

Market Performance:

To add insult to injury, the investment flow maintained Pakistan market as the best performer in the region with KSE-100 outperforming all regional and emerging market indices over the last 5 years.

As of Sept 30, 2016, KSE100 index, the PSX's key stock index, has  gained almost 24 percent year to date making Pakistan the best performing market in Asia. Vietnam and Indonesia follow with returns of 18% and 16.8%, respectively, while India’s Sensex Index has gained only 6.7%.

Year-to-date, the Global X MSCI Pakistan ETF (PAK) has gained 21.7%, according to Barron's Asia.
Pakistan's shares are still selling at a big discount in terms of average price-earnings ratio of just 9.7 while other major indices in emerging markets like India are trading at much higher PE ratios of 15 or more.

A total of 576 companies are listed on the PSX, with an aggregate market cap of slightly higher than 8 trillion rupees (US$80 billion), according to Nikkei Asian Review. PSX market cap is just 28% of Pakistan's GDP of $280 billion.

ADB Pakistan Forecast: 

The Asian Development Bank (ADB) has recently raised Pakistan's economic growth forecast for fiscal year 2017 (from July 2016 to June 2017) from 4.8% to 5.2%. The Bank also sees brighter outlook for the the entire South Asian region.


Pakistan's economic recovery is in full swing with double digit growth in multiple industries, including auto, pharma, chemicals, cement, fertilizers, minerals, etc.  It is expected to pick up steam over the next several years with new investments on the back of China-Pakistan Economic Corridor related projects.

Investors have brushed aside Indian Prime Minister Narendra Modi's threats against Pakistan to drive the shares index to a new record high. They have expressed strong confidence in Pakistan's economy to continue to perform well.

Related Links:

Haq's Musings

ADB Raises Pakistan GDP Growth Forecast

Is Pakistan Ready For War With India?

India's Israel Envy: Surgical Strikes in Pakistan?

Growing Middle Class in Pakistan

Rising Energy Consumption

China-Pakistan Economic Corridor

Pakistan's Thar Desert Sees Development Boom


Suresh Godrej said...

Perhaps Pakistan should worry about reigning in their "non state actors" that it's own Military have refused to act on. Cyril Almeida (aka traitor aka RAW agent by many in Pakistan) was restricted from travelling abroad for highlighting this inaction became international focus and proof positive that Pakistan refuses to go after good terrorists. All the talk on Kashmir now falls flat on Pakistan's diplomatic face internationally for channeling weapons by the LeT into the arms of militants.
(Ashley J. Tellis. "Bad Company – Lashkar-e-Tayyiba and the Growing Ambition of Islamist Militancy in Pakistan" (PDF). Carnegie Endowment for International Peace. Archived from the original (PDF) on 16 May 2012.)

Riaz Haq said...

SG: "Perhaps Pakistan should worry about reigning in their "non state actors" that it's own Military have refused to act on. "

The essence of Kashmir issue today is not Uri or Pathankot or similar other alleged "militant attacks"; it is India's brutal military occupation force of 700,000 heavily-armed Indian soldiers being resisted by over 10 million Kashmiris. Anyone who tells you otherwise is a liar.

Ashley Tellis is neither independent nor credible. His "research" reflects his Think Tanks funders views.

Nitin B said...


Internationally no country has taken the Pakistani position despite the all out Pakistani diplomatic campaign because it is believed that Pakistan is to be blamed for much of it that is happening today.

Riaz Haq said...

NBRX: "Internationally no country has taken the Pakistani position despite the all out Pakistani diplomatic campaign because it is believed that Pakistan is to be blamed for much of it that is happening today. "

These are the delusions being promoted by the Indian media for domestic consumption.

Here are the facts:

China , Turkey and OIC have openly supported Pakistan.

Iran has sought inclusion in CPEC projects.

US has refused to declare Pakistan a "terror sponsor" as demanded by India.

China has refused to support India's entry into NSG and also refused to declare Masood Azhar "international terrorist".

Pakistan has held military exercises with Russia and Iran recently. Another military exercise with 16 nations is scheduled this month.

Investors are continuing to invest in Pakistan.

Anonymous said...

'Showing off on the BRICS platform, at least for the time being, doesn't mean much because the global media have almost written it off with disappointing growth projections for Brazil, South Africa and Russia and competing interest by China.'

The interest in the BRICS was a Congress thing. Modi's BJP does not give a damn about BRICS. They will be happy to sabotage BRICS to suit US interests.

Modi wants to keep Brazil & South Africa in the US sphere of influence. He wants to deal with Russia separately and keep the India-China relationship focused counter-balancing. The BRICS is merely a whimsical distraction that Modi's BJP will use to promote other agendas.

Anonymous said...

Riaz Haq said...

12 Most Incredibly Absurd Things Happened At The “#Hindus For #Trump”. #Modi #Bollywood … via @sahilriz @BuzzFeedIndia

Last night, the Republican Hindu Coalition in New Jersey held a charity event titled “Humanity United Against Terror”, with Donald Trump as the chief guest.

The benefit was held for victims of terrorism in Kashmir and elsewhere in the subcontinent.
The event featured performances from celebrities across the Indian film industry, including Prabhu Deva, Shriya Saran, and Malaika Arora Khan.

1. However, it was everything other than the performances that anyone could talk about – like fliers portraying Sonia Gandhi and Hillary Clinton as evil beings out to frame Narendra Modi.

The fliers were handed out to all attendees, and accused Clinton of colluding with Gandhi to organise a “witch hunt” against Modi.
2. It also featured the bones of dead cattle.

3. Posters of Trump photoshopped on a lotus, the BJP’s official party symbol, adorned the arena.

4. Banners around the venue tried to woo the NRI crowd with promises that Trump would facilitate a faster green card process.

This, despite one of the Trump campaign’s main focuses being a push for tighter immigration laws.
5. It wasn’t all hunky-dory though, with anti-Trump groups protesting outside the venue even as the event began.

6. The highlight of the night was a performance involving Indian dancers being attacked by terrorists with lightsaber-y guns, and being saved by the U.S. army.

No, seriously. Terrorists with lightsabers.

7. Once rescued, the Indian dancers took the U.S. pledge of allegiance, followed by a performance to Bruce Springsteen’s “Born In The U.S.A.”

8. The man of the hour, Donald Trump, eventually walked out on stage and followed the Hindu ritual of lighting a ceremonial diya.

9. Trump began by proclaiming that he was “a big fan of Hindu”.

His odd phrasing didn’t go unnoticed.

10. However, his biggest faux pas occurred when he mixed up two separate terror attacks, and implied that the Indian parliament was in Mumbai.

“For all of the people in Mumbai, the attack on the parliament was outrageous and terrible. We will defeat radical Islamic terrorism,” he misspoke.
11. Trump also talked about PM Modi, and was full of praise for him.

2. He capped off the night by asserting that India and America would be “best friends” under his administration.

Indians following the event on Twitter had more than a few thoughts about the whole thing.

nayyer ali said...

The two biggest impediments to economic growth in Pakistan, infrastructure and power, are the main focus of CPEC. Connecting all the major cities with restricted access multilane highways is a huge improvement, akin to the building of the interstate highway system in the US in the 1950's. Doubling electric power capacity will greatly ease load shedding and allow industry adequate and reliable power supplies. Since 1947 Pak GDP has grown an average of 5% per year, but with large periods of under and overperformance depending on economic policies and political stability. Long stretches of rapid growth in the 60's, 80's, and 00's, corresponded to military rule and free market policies with limited corruption. Socialism in the 70's, pervasive corruption in the 90's, and poor policies by the PPP government in the 08-2013 period slowed growth. Currently we are seeing a more mature PML handling economic policy better, and the CPEC project enabling an environment where long term growth can accelerate to 7%. Rapid improvement in human capital with rising secondary and tertiary education rates will also improve growth. If we can get growth to 7% and sustain for 20 years, per capita GDP at PPP will reach close to 20,000 dollars, which is the lower end of developed societies. It's been a long tough slog, but the experiment of Pakistan has been a success. The Muslims of Pakistan and Bangladesh are far better off than the Muslims of India, which shows that it would have been impossible to have received equal treatment in an undivided India and the price of that would have been very high.

Riaz Haq said...

#Pakistan's 3rd 340 MW #Nuclear Power Plant at #Chashma Goes Into Operation

Pakistan has connected its new, largely Chinese-built nuclear reactor to the national grid as part of broader plans to overcome long-running crippling power shortages.

The facility is located at Chashma, a town in the central province of Punjab, where China has constructed two other nuclear reactors, known as Chashma-1 and Chashma-2. They went into operation in 2000 and 2011 respectively, supplying 600 megawatts of electricity to the grid.

The so-called Chashma-3 project, with an installed capacity of 340 megawatts, was inaugurated “on trial basis” this past Saturday, according to a spokesman for the Pakistan Atomic Energy Commission (PAEC).

“After performing various safety and functional tests, the plant will attain full power in first fortnight of December 2016,” Shahid Riaz, told VOA Monday.

Canada helped Pakistan build its first nuclear power plant 44 years ago in the southern port city of Karachi, which Riaz said is currently generating around 80 megawatts of electricity.

Other projects

Pakistan is also constructing another two plants in Karachi with China’s help at a cost of around $10 billion scheduled to be completed by 2021, with a combined capacity of around 2,200 megawatts. Under the agreement, Beijing will also provide enriched uranium for fuel.

Islamabad’s so-called Energy Security Plan envisages a nuclear power production of around 8,800 megawatts by 2030 and 40,000 megawatts by the year 2050.

The deepening nuclear cooperation between the traditionally close allies comes amid reservations that Pakistan is not a signatory to the Nuclear Non-Proliferation Treaty (NPT), which binds member nations to ensure fissile materials are not used for making weapons.

Islamabad dismisses any such concerns.

Pakistan tested nuclear devices in 1998 in response to similar tests by arch-rival India. New Delhi also refuses to sign NPT.

Pakistani authorities maintain that all of their civilian nuclear facilities are under International Atomic Energy Agency (IAEA) safeguards and the country “voluntarily” observes a moratorium on nuclear testing.

Analysts see growing nuclear cooperation between the two countries as a response to the 2005 commercial deal between the United States and India.

Islamabad has since been unhappy about what it and criticizes it as a discriminatory U.S. approach and has been seeking a similar deal with Washington. Beijing sees the growing U.S.-India nuclear axis as a geopolitical challenge.

Beijing is also investing billions of dollars to build an energy corridor to link Western China and Pakistan’s southern deep-water port of Gwadar in the Arabian Sea. The $46 billion so-called China-Pakistan Energy Corridor (CPEC) will see construction of road and rail networks as well as power projects producing thousands of megawatts of electricity to help Pakistan overcome its energy crisis.

Riaz Haq said...

#Pakistan’s economy: powering ahead with rising investments, improving security & stability. #CPEC @GlobalCapNews …

A frontier market that was flirting with insolvency just three years ago, is now in rude
health. Investment is flooding into Pakistan from China, the West and the Gulf, attracted by
high returns, rising stability and an economy underpinned by strong growth figures and a
pro­ business government.

Pakistan’s economy is on a tear, growing at its fastest pace since the bubble years of the mid­
2000s. According to projections from the International Monetary Fund, the economy is set to grow
by 5.0% in 2017, up from 4.7% in 2016 and 4.0% in 2015. Emerging markets­ focused investment
bank Renaissance Capital tips gross domestic product to expand by an average of 4.4% a year
over the four years to end­ 2017, against a median of 2.8% over the five years to end­n2013.
At every level, there are signs of marked improvements in one of South Asia’s most vibrant
markets. Global institutions, attracted by the high yields on offer, are snapping up Pakistan
securities listed at home and abroad.
China is pumping billions of dollars into vast infrastructure projects that will open up the country’s
northern borders, allowing locally made goods, from cotton and textiles, to raw and produced food
products, to potash and fertiliser, to be shipped overland, into Central Asia and Russia, and
Deepening markets
Pakistan’s efforts to widen and deepen its capital markets, and to foster the creation of an
innovative, knowledge­ based economy, are gaining traction. The country is rapidly becoming a key
provider of niche IT services, with upstart companies in Karachi and Lahore bursting with freelance
software coders, programmers, and application developers. The primary equity capital markets are
returning to action. An initial public offering completed in September by Loads Limited, saw the
auto parts maker raise $20m from local and foreign investors; more stock sales are expected in the
months ahead.

Riaz Haq said...

#Pakistan: #Asia's Next Growth Engine- Nikkei Asian Review. Next11. Young Demographics. Growing Work Force Dividend.

despite its troubled image, Pakistan is gradually emerging as an economy with significant growth potential.

It is one of the "Next 11" countries identified as the next emerging forces after BRICS -- Brazil, Russia, India, China and South Africa. Pakistan's inclusion is predicated on a population of 190 million, making it the sixth most populous country in the world.

In addition, Pakistan's young population is growing, meaning that it is likely to enter a period of "demographic dividend," in which the percentage of the workforce against total population rises to high levels for the next four to five decades, helping to accelerate economic growth.


MSCI, a prominent provider of stock indices, announced in June that it will reclassify Pakistan into its Emerging Markets Index from the Frontier Markets Index, having downgraded it in December 2008

Apparently MSCI has a renewed positive view on the country now that it has maintained solid economic growth on the back of continued loans from the International Monetary Fund and falling oil prices, and that its stock market has been on a steady rise.

Provided safety concerns continue to be addressed, Pakistan has the potential to become one of Asia's growth engines.

Riaz Haq said...

#StandardAndPoors 500 Index Funds Outperform 99% of Actively Managed #US #equity funds. … via @FT

Amin Rajan, chief executive of Create Research, the consultancy, said: “These numbers are scary. Active managers need a root and branch look at their investment processes to retain their relevance in today’s surreal investment landscape.”

According to the analysis, 99 per cent of actively managed US equity funds sold in Europe have failed to beat the S&P 500 over the past 10 years, while only two in every 100 global equity funds have outperformed the S&P Global 1200 since 2006. Almost 97 per cent of emerging market funds have underperformed.

Daniel Ung, director of research at S&P Dow Jones Indices, said: “The figures are startling.”

Asset management experts believe the findings will exacerbate investor concerns about overpriced, underperforming active funds, and will ultimately push investors into cheaper indexed and exchange traded funds.

Stewart Aldcroft, senior adviser on the Asian fund industry at Cititrust, the fund services business of Citigroup, the US bank, said: “The S&P figures have become a massive boon for the ETF industry, which has been able to use them to show the benefit of passive investing.

“The active industry has built a whole range of arguments against [S&P’s statistics], but until they start to consistently achieve better returns, they will continue to be on the back foot.”

Last week politicians and consumer protection groups questioned the integrity of Europe’s €13.3tn asset management industry at an event specifically convened to look at the role of the asset management market.

Attendees at the meeting, held at the European Parliament and organised by Sven Giegold, a Green MEP, accused investment houses of overcharging their clients and failing to put investors first.

Mr Giegold, who co-organised the event with Sirpa Pietik√§inen, an MEP from the European People’s party, said that “high costs” were hurting investment returns.

Assets managed in passive mutual funds, which provide lower-cost exposure to markets by tracking an index, have grown four times faster than traditional active products since 2007, according to Morningstar, the data provider.

Assets held in passive mutual funds have grown 230 per cent globally, to $6tn, since 2007. However, assets held in active funds total $24tn.

Riaz Haq said...

Chinese cos consortium to invest $3b in infrastructure, industries in #Pakistan. #China #CPEC … via @epakistantoday

A consortium of Chinese investment companies met Prime Minister Nawaz Sharif on Friday and announced to bring $3 billion in investment funds to Pakistan.

Representatives of a consortium of Chinese investment companies comprising China Huarong International Holdings Limited, China Innovative Finance Group Limited, Hong Kong Tian Group, Chandong Hi-Speed Group and China Road & Bridge Group called on Prime Minister Nawaz Sharif at the PM House.

Warmly welcoming the delegation, the prime minister appreciated the Chinese delegation’s fruitful interaction with ministries of Finance, Petroleum & Natural Resources, Water & Power and Capital Development Authority. The PM expressed hope that members of the Chinese delegation would have a productive visit in the backdrop of briefing by various ministries about immense potential for investment in Pakistan’s infrastructure development, energy and communication sectors.

The prime minister expressed his gratitude to the leadership and brotherly people of the People’s Republic of China for their all-weather support that was getting stronger with each passing day. The CPEC was a game changer that was going to transform the lives of the billions of people of the region, the PM added.

He said that the economic outlook of Pakistan has altogether changed in the last three years, which was being acknowledged globally. Standard & Poor’s (S&P) has also upgraded Pakistan’s ranking to B from B-; Pakistan is among this year’s global top 10 improvers in Doing Business 2017. Inflation was continuously on downward trend; reduction in petroleum prices also helped in decreasing inflation, further added the PM. The Foreign Exchange Reserves have now increased to over $ 24 billion, the prime minister apprised the delegation.

Our Investment Policy has been designed to provide a comprehensive framework for creating a conducive business environment for the attraction of FDI, he said. Pakistan’s policy trends have been consistent, with liberalization, de-regulation, privatization, and facilitation being its foremost cornerstone, stated the prime minister. The Law of Special Economic Zones (SEZ) has been made to meet the global challenges of competitiveness to attract Foreign Director Investment (FDI).

Members of the visiting delegation lauded the vision of the prime minister for economic revival and putting the country on development path. The members of the delegation said that Pakistan was fully ready as well as capable of absorbing and capitalising the Foreign Direct Investment. The delegation apprised the prime minister that they were bringing $ 3 billion investment fund to Pakistan because of the vision of the prime minister that focussed on infrastructure development and energy sectors. The Chinese delegation also expressed its intent to explore possibility of starting a new airline in Pakistan after the permission from the Government of Pakistan. The Chinese side said that it was actively pursuing its investments in infrastructure, power, aviation and tourism sectors of Pakistan.

‘We fully appreciate the vision of Prime Minister Nawaz Sharif which enunciates that economic prosperity is an offshoot of infrastructure connectivity and self sufficiency in the energy sector’, the members of the delegation stated. They said that the present government under the visionary leadership of Nawaz Sharif has done enormous work in infrastructure development and achieving energy self sufficiency. The present government has very liberal investment regime that offers an ideal and investor friendly environment for which the leadership role of Prime Minister Muhammad Nawaz Sharif is highly appreciated, said the members of the delegation.

Riaz Haq said...

Dailytimes | #CPEC to initiate flurry of economic activity in #Pakistan: #BASF - via @Shareaholic

The China-Pakistan Economic Corridor (CPEC) would help initiate a flurry of economic activity in Pakistan, said Tay Jui Seng, an official of the German Chemical giant - BASF.

Talking to the media along with Faisal Akhtar, the head of BASF Pakistan, Seng said he would report back to his company as to how the BASF can participate in spurring the business activities in the Pakistani market.

Tay Jui Seng, who is the Business Management Transportation Performance Materials Vice President for Asia Pacific, is based at BASF's manufacturing facility in Shanghai. He undertook a three-day visit to assess the market as well as the opportunities available in Pakistan.

Seng pointed out that the BASF has research facilities based in many countries of the world and has been coming up with innovative products from time to time through research and development (R&D). BASF was in a position to provide quick solutions to the requirements of the businesses in Pakistan, which is an emerging market, he added.

He stressed that Pakistan can also benefit a lot from its human resource especially by imparting right type of education and training to productive use of their talent, energy and potential.

Seng also indicated that the BASF regularly trains their people from time to time to enhance their technical skills and know-how to serve customers more efficiently. He said that his company could also consider as to how it can participate in the CPEC activities through the supply chain mode.

Seng also referred to the impressive growth of the automotive industry in Pakistan and especially in the two-wheelers market. He hinted that cooperation may also be extended by the BASF for the construction industry as well as in chemicals and polymers and also address the quick solutions that are required towards the growth phenomenon in Pakistan.

Faisal Akhtar on the occasion said that Tay Jui Seng's visit augurs well and indicates towards the company's interest for further collaboration in the growth process in Pakistan where the business environment is now quite conducive.

It may be pointed out that the BASF Chemicals and Polymers Pakistan Limited has changed its name to BASF Pakistan (Private) Limited effective from November 1, 2016. A communication said that the management under its new name assures all its customers of the same continuous commitment to support businesses with products and services.

Riaz Haq said...

International business enterprises eager to get involved with #CPEC in #Pakistan - Global Times #China

As the first Chinese truck containers entered a Pakistani dry port in the north last week and the first major size vessel last month docked at the Gwadar port, the ending point of the China-Pakistan Economic Corridor (CPEC), CPEC, a multi-billion-US dollar project, has become a visible "game changer" for Pakistan and the entire region.

With an improved security situation in the south Asian country, Pakistan's macroeconomy has been stabilizing and enjoying momentum over the past years. Recently, the country has been upgraded to an emerging economy from a frontier economy on the Morgan Stanley MSCI index.

"The CPEC itself for Pakistan could at least offer a significant opportunity for the country to address its supply side constraints such as weak foreign capital inflow," said Bilal Khan, senior economist at Standard Chartered Bank (Pakistan) Ltd., adding that against the backdrop of rebounding oil prices in the near future, which means Pakistan's oil import bills will swell, the CPEC will attract foreign direct investment from both private and public sectors to help keep a balanced current account in Pakistan.

Due to the enhanced infrastructure such as roads and railways brought by the CPEC, "we forecast that the gross domestic product (GDP) growth should increase from around 4.7 percent last year to around 6 percent by 2019, and stay around the same level for 2020," the economist told Xinhua in a recent interview in Karachi, the financial center of Pakistan.

With such a robust economic outlook, many foreign companies that have already been investing here for years are tending to re-invest in the country by seeking more opportunities under the CPEC, according to Pakistan's Overseas Investors Chamber of Commerce and Industry (OICCI).

Abdul Aleem, chief executive and secretary general of the OICCI, told Xinhua that members of the chamber, who economically contributed to about 18 percent of GDP and some 33 percent of total tax collected in Pakistan, have seen the potentials in the market here and they re-invested about half of their profit in Pakistan rather than taking their money back.

He said that his members and many local companies are eager to talk with Chinese companies that have projects under the CPEC so that they could make clear exactly what the opportunities are and how to access them.

As a member of the OICCI, the Standard Chartered Bank (Pakistan) Ltd. believes that the CPEC is a unique opportunity for it to play a "pivotal role" in ensuring that the bank could help make the huge project a real success in the south Asian country, according to the chief executive officer (CEO) of the bank.


He said that the bank is also promoting the internationalization of the Chinese currency renminbi in order to facilitate settlements by companies involved in China or CPEC related business.

Identifying the myriad lucrative opportunities offered by the CPEC, also a pilot project under the China-proposed Belt and Road initiative, Standard Chartered also formed a "Belt & Road" Strategy Execution team to help facilitate its business in countries covered by the initiative.

"More than 60 percent of Standard Chartered's global markets across Africa, Asia and the Middle East stand to benefit from China's 'Belt & Road' initiative," said a recent press release by the bank in Karachi.

Riaz Haq said...

World Bank projects 5.4% growth for #Pakistan in Fiscal 2017/18 July 2017-June 2018 #CPEC via @MailOnline

Pakistan's economy is set to grow by a robust 5.4 percent by 2018 as Chinese investment from a multi-billion dollar infrastructure project flows into the country, the World Bank predicted in a new report Thursday.

The cash-strapped country, for years plagued by a bloody homegrown Taliban insurgency, has been battling to get its shaky economy back on track and solve a chronic energy crisis that cripples its industry.

But now confidence in South Asia's second-biggest economy is growing, with security improving and the International Monetary Fund claiming in October that it has emerged from economic crisis after completing a bailout programme, though it still faces major challenges.

Pakistan recorded a 4.7 percent growth in gross domestic product (GDP) for the fiscal year ended June 2016, the highest rate in eight years, and Prime Minister Nawaz Sharif has set an ambitious target of 5.7 percent for the current year.

He is banking on structural reforms, the improved energy sector, taxation -- and China's ambitious $46 billion infrastructure project, the China-Pakistan Economic Corridor (CPEC), linking its western province of Xinjiang to the Arabian Sea via Pakistan.

The World Bank report appeared optimistic about his plans, predicting even further growth in 2018.

"The pace of Pakistan's economic growth will accelerate to 5.4 percent in fiscal 2018," the Bank report said, observing that a moderate increase in investment mainly related to CPEC projects is expected to contribute to an acceleration of growth.

The Bank also noted Pakistan's efforts to address grinding poverty, including with revised ways to measure it.

"Based on the revised poverty line..., the percentage of people living below the poverty line decreased from 64.3 percent in 2002 to 29.5 percent in 2014," the report said.

Illango Patchamutu, World Bank country director for Pakistan, said the country needs to push forward with deeper structural reforms, and that the World Bank stood ready to support such an agenda.

Riaz Haq said...

Global trade and capital flows flat or declining as globalization hits a wall.

Global capital flows:

Peter McQuade and Martin Schmitz of the European Central Bank investigate the decline in capital flows between the pre-crisis period of 2005-06 and the post-crisis period of 2013-14. They report that total inflows in the post-crisis period reached about 50% of their pre-crisis levels in the advanced economies and about 80% in emerging market economies. The decline is particularly notable in the EU countries, where inflows fell to only about 25% of their previous level. The steepest declines occurred in the capital flows gathered in the “other investment” category.

Global trade flows:

This year has been full of news about the slowing or perhaps even end of globalization. The main evidence is that global trade volumes appear to have stopped rising, something that hardly ever happens outside of a recession. Still, if you step back a little, you can make a case that the globalization train is still chugging -- slowly -- along.

Last February, the McKinsey Global Institute put out a report on this rise of "digital globalization" and declared that:

Flows of physical goods and finance were the hallmarks of the 20th-century global economy, but today those flows have flattened or declined. Twenty-first-century globalization is increasingly defined by flows of data and information.

Riaz Haq said...

#Pakistan's Stock Market Leaves #India's And #China's In The Dust via @forbes #KSE100 #PSX

Pakistan is a frontier market economy, while India and China are emerging market economies. This means that Pakistan’s economy is less exposed to the global economy than India and China. Thus, it is less vulnerable to interest rate fluctuations in developed countries, most notably in the US.

Then there’s the pouring in of Chinese investment, which is turning Pakistan into Beijing’s corridor to Middle East oil and to Africa’s riches.

Add to that a couple of overseas endorsements for Pakistan’s market reforms from overseas institutions that have been hyping investor expectations. Like $1 billion in support from the World Bank – and a couple of domestic acquisitions from foreign suitors like the acquisition of Karachi’s K-Karachi by Shanghai Electric Power Co.

While Pakistan’s market has been getting praise from overseas institutions and investors, India’s markets have been rattled by Modi’s experimentations with the country’s currency, as I wrote in a previous piece here. And China’s markets have been unsettled by the return of heavy-handed government policies, which have scared away foreign investors.

To be fair, frontier markets are highly volatile, with one year’s big winners turning into next year’s big losers. Besides, with a big run up over the last five years, the big gains are already behind, for now. Investors should be very careful in establishing new positions at this time.

Riaz Haq said...

#Pakistan shares index #KSE100 hits all time record to close at 44,199. Up 35.13% in 2016 YTD. #Karachi #CPEC …

KARACHI: Bulls dominated the Pakistan Stock Exchange on Tuesday as the market crossed another psychological landmark. The main index jumped past the 44,000 level after having crossed the 43,000 on November 14, 2016.

The market traded neutral to developments of the Panama case. The benchmark KSE 100 index rallied up to record a new highest high of 44,236.89 with appreciation of 496.92 points. The index ended at 44,231.10, up by 491.13points, levels not touched ever before. The KMI 30 index ballooned higher by 1115.77 points to 74,785.76. The KSE All Share index also surged 309.55 points to close the session at 30,522.54. The advancer to decliner ratio stood at 217 to 175.

The market volumes edged up from previous session’s 345.47 million to 372.59 million. K-Electric Limited (KEL +1.84%) turned out to be volume leader, volume of 22.80 million, for the day after the Competition Commission of Pakistan (CCP) gave clearance to its acquisition.

Many cement stocks featured in the list of top traded scripts but the commercial bank sector again reported top cumulative volume of 59.85 million. The cement sector followed with total of 56.94 million shares traded.

The cement sector was star performer for the day after All Pakistan Cement Manufacturers Association (APCMA) released data for the month of November 2016. The industry achieved its highest capacity utilization of 98.61% and recorded sales of 3.749 million tonnes against 3.377 million tonnes in the same month last year. Local demand expanded from 2.843 million tonnes to 3.270 million tonnes in the same month last year while exports continued to contract, down 10.39%.

According to spokesperson of APCMA, exports are expected to remain under pressure as Afghan market is penetrated by Iran and export by sea is on the decline whereas exports to India have a positive trend. However, he was confident that growth in local demand would nullify this impact.

Eleven of seventeen scripts traded gained around 5%, including Attock Cement (Pakistan) Limited (ACPL +4.97%), D G Khan Cement Company Limited (DGKC +4.89%), Maple Leaf Cement Factory Limited (MLCF +4.99%) and Fauji Cement Company Limited (FCCL +4.98%).

Riaz Haq said...

5-Year Stock Performance: #India #SENSEX up 65% vs #Pakistan #KSE100 up 293% …

Riaz Haq said...

World's top performing #Pakistan bourse to sell 40% stake for $225m. 17 prospective buyers include #Brits #Chinese

Karachi: Pakistan’s main bourse is to sell a 40 per cent stake next week, a company official said on Friday, citing Chinese and British consortia as among the prospective buyers.
At least 17 entities have expressed an interest in the Pakistan Stock Exchange (PSX), whose benchmark stock index was one of the best performing indices worldwide in 2016, gaining 38 per cent so far.
The PSX is currently owned by more than 300 Pakistani brokers.
“We are opening bidding for the 40 per cent share of the PSX on December 15,” Shahzad Chamdia, chief of a PSX divestment committee, told AFP.
Analysts estimate the deal will be worth around $225 million (Dh826.2 million), but the committee declined to comment.

“We have the reference share price being evaluated by a third party and will reveal it only on the bidding day,” Chamdia said.
Sources at the PSX said a consortium consisting of the Shanghai Stock Exchange, the Shenzen Stock Exchange and a Chinese fund is bidding, as well as another consortium of UK financial institutions led by Nasdaq Technology.
Chamdia did not reveal the names of either consortia but confirmed that Chinese and British stock companies were in the running.
Other bidders include Pakistani banks and financial institutions, but their chances of winning are thought to be unlikely.
Following the sale, the company plans to offer 20 per cent of its shares to the public, Chamdia said.
Under its stock exchange reforms, Pakistan merged its three stock exchanges — the Karachi Stock Exchange, the Lahore Stock Exchange and the Islamabad Stock Exchange — to form the PSX in January this year.
The benchmark KSE index of 100 shares was at its highest ever level of 45319 points on Friday, compared with 32816 points on January 1.

Riaz Haq said...

#Asia’s top-performing market #Pakistan's #PSX to see 7-8 new listings in 2017. #KSE100

KARACHI: Asia’s best-performing market, the Pakistan Stock Exchange (PSX), is expected to see seven to eight new company listings in 2017 through the issuance of shares to general public in initial public offerings.

“The companies that will make the initial public offering (IPO) will be from sectors like packaging, transportation, real estate investment trust, insurance and auto vendors,” said Shahid Ali Habib, Chief Executive Officer of Arif Habib Limited.

“At least four of the expected IPOs are in our hands; these are expected to be launched by June 2017; we cannot disclose their names according to regulations,” he said.
In addition to this, the government is also in the process of getting State Life Insurance Corporation (SLIC) listed on the stock exchange.

The making and breaking of records at the PSX suggested that more companies would come to the exchange to raise interest-free funds in IPOs in a bid to develop new projects or expand their ongoing businesses, he said.

In the current calendar year, three new companies were listed on the PSX. Two of them were Hi-Tech Lubricants and Loads Limited. In the year to date, the market’s benchmark KSE 100-share Index has advanced by over 40% to 46,584.53 points.

Market outlook

Habib anticipated that a lot of positive happenings in the economy would support the benchmark index advance to 55,500 points by the end of December 2017. “Pakistan’s equity market will potentially generate a yield in the range of 17% to 21% in 2017,” he said.

The bourse will continue to record strong returns in CY17, an assessment supported by the brokerage house Arif Habib’s price-to-earnings ratio (PER) re-rating hypothesis.

“Currently, the market is trading at a CY17F PER of 9.1x (multiples), a discount of 22% and 34% to the MSCI Emerging Market and Asia-Pacific region, respectively,” he said and expected the equity market to go up to 9.7x in 2017.

All you need to know about the PSX divestment

Factors supporting the upward trend include reclassification of Pakistan into the MSCI Emerging Market from the MSCI Frontier Market, double-digit earnings growth for listed companies (16.5%), attractive valuations, a strategic foreign investor acquiring a big stake in PSX and flush of liquidity from divestment to brokers (in the range of $90-100 million), continuing economic growth (5.1% in FY17), Chinese investment in Pakistan’s energy and infrastructure worth $55 billion by FY17-18 and political maturity.

According to Habib, brokers are expected to re-invest the $90-100 million in equities, which will provide additional support to the market.

He said the low interest rate scenario had created huge liquidity in the system and a big part of it was expected to land in the share market.

Local investors have so far invested $450 million in the market. The trend is expected to continue in 2017.

Foreigners to invest $300-400m

Habib said foreign investors had so far sold stocks worth $230 million at the PSX in 2016, as fund managers in the MSCI Frontier Market were pulling out ahead of Pakistan’s upgrading to the MSCI Emerging Market in May 2017. They are expected to return after Pakistan’s reclassification.

He anticipated that foreigners would invest in the range of $300-400 million in 2017 against selling in 2016. At present, foreigners are holding shares worth $6.5-7 billion at the PSX.

Riaz Haq said...

From Wall Street Journal Dec 30, 2016:

Pakistan’s benchmark KSE 100-stock index was on track to become the biggest gainer this year, with a 45.3% surge after its inclusion in the MSCI Emerging Markets Index in June.

Asia’s equity markets ended 2016 slightly higher, despite a number of unexpected global events that had threatened to throw markets into disarray.

With China the main exception, major Asian stock markets rose for the year. Australia’s S&P/ASX 200 rose 7%, while both Japan’s Nikkei Stock Average and Hong Kong’s Hang Seng Index added 0.4%. Singapore’s Straits Times Index rose 0.2% for the year.

Among smaller markets, particularly those in Southeast Asia, performance was more mixed, with benchmark indexes in Malaysia, Vietnam and the Philippines ending the year in the red.

Thailand’s benchmark SET 50 index was an outperformer, with the index on track to gain 18.6% for the year, even as investor buying interest paused after the death of the country’s long-reigning monarch in October.

“We are seeing a Goldilocks scenario in global markets,” said Khiem Do, head of Asian multiasset investments at Baring Asset Management.

Corporate earnings have been picking up, prompting investments, he said. In addition, Mr. Do said that toward the second half of the year, investments in fixed-income assets started moving to equities, helping global markets.

Still, there were a number of global surprises that affected Asia’s equity markets, including the Brexit vote in June and Donald Trump’s victory in the U.S. presidential election in November.

Even more surprising, analysts say, was the stock-market rally that followed Mr. Trump’s win. That was opposite earlier expectations of what would happen in the event of a Trump win, said Andrew Sullivan, managing director of sales trading at Haitong International Securities.
“People have become more cautious and acting on fact rather than rumor,” Mr. Sullivan said

Meanwhile, the Shanghai Composite Index tanked 12.3% for the year, as regulators there cracked down on leveraged purchases of stocks by insurance companies and as the yuan fell about 6.5% against the U.S. dollar for the year.

To be sure, China’s declines could have been much steeper. In January, the Shanghai index plunged as much as 25%, as a circuit-breaker mechanism for the stock market, introduced to reduce volatility, set off a global market panic, forcing authorities to shelve the system.

Malaysia’s Bursa index ended down 3.7% for the year, suffering from the controversy surrounding the Malaysian state investment fund known as 1MDB.

Though not considered one of Asia’s main markets, Pakistan’s benchmark KSE 100-stock index was on track to become the biggest gainer this year, with a 45.3% surge after its inclusion in the MSCI Emerging Markets Index in June.

However, on Friday, the last trading session of 2016, a weaker dollar early in the day sent local currencies higher, hurting the competitiveness of exports in the region.

The greenback later recovered to trade 0.4% higher compared with the yen. But that wasn’t enough to stave off the decline in export stocks such as Honda Motor, which dropped 0.8%; Nissan, which ended down 0.4%; and Sony, which fell 0.7%.

Toshiba, however, gained 9.4%, after analysts pointed out that the stock was oversold on worries of rising expenses at its U.S. nuclear-power unit.

Overnight in the U.S., crude-oil prices fell after crude stockpiles there rose unexpectedly. In Asian trade, prices recovered slightly to trade at $57.08 a barrel.

Among energy stocks in the region on Friday, Japan Petroleum lost 1.6%, and Inpex Corp. fell 0.8%. In Australia, Woodside Petroleum dropped 1.8%, contributing to the 0.6% decline in the benchmark S&P/ASX 200.

In currencies, the euro briefly jumped on Friday against the U.S. dollar in thin Asian trade. The currency pair rose above $1.0700, its highest level in two weeks, from around $1.0490 in a matter of moments.

Riaz Haq said...

Q1 Report from State Bank of #Pakistan expects FY17 #GDP growth between 5% and 6%, Budget deficit to rise to 5% …

The State Bank of Pakistan (SBP) on Friday released its first quarterly report on the economy of Pakistan.

According to the report, SBP has projected growth in the manufacturing sector in the remaining part of the fiscal year due to supporting policies and encouraging outlook.

A good response is expected from the automobile, sugar, pharmaceuticals and construction sectors.

The report states that fiscal deficit rose because of lower than expected tax collection in the first quarter. SBP expects fiscal deficit to rise to 5 per cent of GDP in FY17 as against the target of 3.8 per cent.

SBP is also expecting export targets for FY17 to be missed by $2.2 billion from the target of $24.7 billion.

The GDP growth rate is projected to be between 5 to 6 per cent in FY17 against the target of 5.7 per cent.

Remittances will also remain stagnant in FY17 around last year’s level of $20.5 billion.

According to SBP, inflation will range between 4.5 per cent to 5.5 per cent in FY17 against the target of 6 per cent.