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


Riaz Haq said...

#China refuses to support #India’s #NSG bid, #Azhar’s banning - The Hindu. #Pakistan #BRICSSummit …

On the eve of President Xi Jinping’s India visit, China on Friday stuck to its guns saying that there was no change in its stand on India’s Nuclear Suppliers Group membership bid and New Delhi’s attempts to get Jaish-e-Mohammad (JeM) chief Masood Azhar designated as a terrorist by the United Nations (UN).

As Mr. Xi is due to arrive in Goa on Saturday to take part in the BRICS Summit, Chinese Foreign Ministry Spokesperson Geng Shuang said the relations between India and China made “great headway” despite some “disputes” but there was no change in in Beijing’s stand on the issues of NSG and Azhar.

“I have stated China’s position. I would like to reiterate that the UN committee dealing with the listing does it according to provisions of the UN charter,” he said while replying to a question on India’s application to ban Azhar following the Pathankot terrorist attack.

1267 Committee line

Mr. Geng, at a briefing, said China maintained that 1267 Committee of the UN designated to ban terrorist outfits should work on true facts and make a decision according to consensus of its members.

“All parties are divided in listing of the relevant people. And this is why China has put on hold banning Azhar,” he said.

The second technical hold put by China will give enough time to make the listing decision, Mr. Geng has said, adding that this also shows the responsible and professional attitude of the Chinese side.

“China’s position has not changed regarding the joining of the NSG by India,” Mr. Geng said.

‘Need for consensus on NSG issue’

Speaking on the same issue earlier this month, China’s Vice Foreign Minister Li Baodong had harped on the need to build consensus over the admission of new members in the 48-member NSG.

Mr. Geng said that he wanted to “underscore” that in recent years China and India relations had been making “great headway” despite some “disputes.” He said that the “mainstream of bilateral relations has been positive” and “cooperation far outweighs competition.”

Mr. Geng has expressed hope that the two countries can continue with dialogue and cooperation to exchange views on some disputes, seek solutions and properly manage relevant disputes.

Expediting CPEC

Meanwhile, a Chinese scholar, Hu Shisheng, Director of the China Institutes of Contemporary International Relations affiliated to the Chinese Foreign Ministry, said China may speed up the construction of the $46 billion China-Pakistan Economic Corridor which passes through Pakistan-occupied Kashmir if Pakistan was isolated and cornered by India.

“China has to discuss with Pakistan about the current situation on how to handle and how to come out it,” Mr. Hu said speaking about Pakistan’s isolation in the region leading to the postponement of the SAARC summit after the Uri terror attack in which 19 Indian soldiers were killed.

“China has to further enhance relations with Pakistan if it feels cornered. A cornered regime some times will be more desperate, which will not be conducive to political development within Pakistan,” Mr. Hu said.

Riaz Haq said...

#India Is Making A Mistake By Turning #BRICS Summit Into A #Pakistan Bashing Program. #Modi #Kashmir #China

Much before the BRICS heads of nations meet in Goa today, the western media had already begun writing about its live funeral, if not epitaph. Less than a decade into its existence, this economic grouping of newly industrialised countries--that account for about half of the world population and nearly a quarter of its combined GDP--seems to be losing its relevance other than being a feel-good club.

At its eighth annual meeting in Goa, BRICS is making headlines in India, not for any economic cooperation and growth, but for geopolitics. If the seventh summit at Ufa in Russia last year was about the much celebrated BRICS Bank (New Development Bank) and contingent reserve arrangement, all that we hear about the eight summit in Goa is geopolitics: terrorism, military cooperation with Russia and isolation of Pakistan. And it's India that's mostly talking.


India using SAARC for ridiculing Pakistan or even undermining its convening rights is the swat, BRICS is the sledgehammer. Instead of development planners and finance ministry bureaucrats, it's going to be an Ajit Doval show. At least that's what Indian media reports indicate. Apparently he and his officials will push for "a strongly worded counterterrorism statement and a declaration that will highlight isolating countries that provide shelter to terror groups and help in arming these groups". The summary of this statement is two words: isolate Pakistan. Is that what BRICS means to India?

And how does it even matter? Will Russia and China, the only BRICS countries that are of consequence to the south Asian geopolitics, will ever do anything? Certainly not. Pakistan is China's strategic asset and Russia, a self-interested voluntary ally against American strategy of using India as its Asian pivot. Brazil and South Africa are so far away and don't even have enough money or political resources for themselves.

Therefore, making BRICS a proxy opportunity to bash Pakistan is a little excessive. If India has been clever and strategic, it should have used it for strengthening the idea of BRICS, when the whole world is justifiably sceptical. Isolation of Pakistan should have been just the incidental message that India would have anyway conveyed by inviting BIMSTEK (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation), that Pakistan is not a part of.


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.

India could have done by less theatre and more substance. Repetition of lines to keep people in perpetual anticipation, national pride and false-hopes, not just in dealing with Pakistan, but also in improving their lives, seems to have become a habit. And it has started showing everywhere as a standard, Indira-era Indian imprint.

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.

NBRX 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...

What next 4 #Pakistan, #Asia's best-performing stock market? It's already up 27% year-to-date #Karachi via @markets

Pakistan has plowed an independent trajectory this year, outperforming both its fellow frontier markets and members of the emerging-market grouping that it is slated to join in 2017.

The country's benchmark KSE100 Index has rallied 27 percent year-to-date to become Asia’s best-performing equity market in 2016, according to a basket of 26 peers tracked by Bloomberg. The market received a boost in June when MSCI Inc. announced that it would reclassify Pakistan as part of its benchmark emerging-market index from May 2017 — a show of confidence that it declined to extend to China.

It was a long time coming for South Asia's second-largest economy. The Pakistan Stock Exchange, previously known as the Karachi Stock Exchange, was downgraded to frontier-market status in 2009 after it introduced curbs against sell orders to stem an investor exodus in late 2008.
After registering gains over seven of the eight years since, investors are betting it still has further to climb.

"The benchmark index can easily reach 60,000 before the general election in 2018," said Vasseh Ahmed, who's chief investment officer of Karachi-based Faysal Asset Management Ltd., in an interview. That represents almost a 50-percent increase from present levels. "Now that the IMF program is over, the government will be giving incentives that will positively impact the market and business sentiment. The boost from the upgrade and Chinese investment is also there.".

The KSE100 Index reached its all-time peak of 41,464.31 last Friday, and by 2:23 p.m. in Karachi was heading toward a new record. Last month Pakistan completed a three-year $6.6 billion International Monetary Fund loan program. Thanks to the aid, Prime Minister Nawaz Sharif was able to avert a balance-of-payments crisis and boost foreign-exchange reserves to a new high.

"Textile is already seeing the push, and the government may further boost the agriculture sector. The banking sector will also rebound given interest rates have bottomed, while the oil and gas sectors are rallying following a recovery in energy prices and infrastructure development," added Ahmed. The country's central bank has held its benchmark interest rate at 5.75 percent since cutting by 25 basis points in May.
For Federico Parenti, Milan-based fund manager of Base Sicav Emerging and Frontier Markets Equity Fund, Pakistan is on top of his wish-list.
"My fund is currently waiting to get access to such a beautiful and nice market," Parenti said by e-mail. "At the moment Pakistan access is delayed due to fear of political and religious risks, but I think staying just in Europe for investment and thinking other places won't change for the better is a bigger risk."


For Parenti, the improvements that are predicted by EFG Hermes to lure around $475 million of inflows by the middle of next year do, in themselves, carry risks.
"Because of the MSCI upgrade, the ratio of foreigners holding onto Pakistani stocks is set to increase," the fund manager said. "But they will also add volatility since most of the money is 'disloyal,' meaning that they can easily pull their money out of the country whenever they want."

Still, he said he plans to allocate 10 percent of his funds to Pakistan once regulators give the go-ahead, with these challenges failing to overwhelm to the country's enticing demographics. "The prospect is bright with the growing young population and the rising middle class. I want a piece of your economy — a piece of your frozen food, a piece of your cement, and a piece of your hospitals," he wrote.

Riaz Haq said...

#Pakistan’s moment of opportunity Op Ed by visting #IMF Chief Chiristine Legard. #investment #debt #growth #exports …

In this mixed global environment, Pakistan cannot rely exclusively on its trading partners to support growth. This means that the country will have to lean on the strength of its own policies. Four priorities are central.

First, make the economy more resilient. With uncertain global prospects, the economy needs to prepare for potential shocks that may come down the road. At 65 percent of GDP, Pakistan’s public debt remains too high, with too many resources going toward interest payments instead of public investment, education, and other growth-enhancing areas. The task at hand is to continue improving public finances while accumulating international reserves. In parallel, social safety nets need further strengthening to protect the most vulnerable segments of society.

Second, raise growth. Pakistan can grow at faster rates than the current 4-5 percent per year. This will require higher investment and greater productivity growth. Public investment in infrastructure can help remove obstacles to economic activity, and the China Pakistan Economic Corridor is a very good opportunity. With careful management of its financing arrangements, it can be a transformative success. Yet, the private sector also needs to step up in strengthening economic prospects.

Today, private investment in Pakistan accounts for only 10 percent of the economy – much below the average of 18 percent for emerging markets. Completing energy sector reforms and improving governance and the business climate will be crucial to enable faster private sector growth.

Third, the quality of growth matters. Economic growth in itself is not enough unless its fruits are broadly shared among the population. Two dimensions are very close to my heart: education and gender issues. More than six million children of primary school age, including 3.5 million girls, are currently out of school. Higher spending on public education is clearly important, but so are improvements to the quality of education. The country needs to ensure access to opportunity for all segments of society and equip its people with the skills needed for tomorrow’s job market.

Similarly, with only a quarter of women participating in the labour force, Pakistan can add significantly to its growth potential by integrating women better into the economy. This will make growth not only more inclusive, but also higher. IMF studies have shown that closing the gender gap could boost Pakistan’s GDP by almost one third.

Finally, believe in the global system. Pakistan’s exports are only about a quarter of what they could be based on the experience of emerging markets. There is vast untapped potential to trade with neighbours and integrate into global value chains. A sustained focus on regional and international engagement can help realise this potential.

I am confident that Pakistan can seize this moment of opportunity and transform itself into a dynamic, vibrant, and integrated emerging market country. Over the coming years, a stable and vibrant economy that creates sustainable jobs and spreads the fruits of growth more widely can be a strong force for overall domestic stability. The same applies to trade and cross-border investments, which tend to bring people together in the pursuit of mutual economic advantages, and can provide a stabilizing force in the region.