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|
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.
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.
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.
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