Pakistan ETF:
The new Pakistan ETF launch coincided with Chinese President Xi Jinping's visit to Pakistan where he announced massive $46 billion investment in Pakistan's energy and infrastructure. The sectors expected to benefit most initially from the Chinese investment are: energy, cement and financial services.
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| Pakistan Outperforms Emerging, Frontier Markets Source: Economist |
Although the ETF launch timing was fortuitous, it was actually planned well before the Chinese leader's visit. It caters to individual investors seeking outsize returns in Karachi where KSE-100 index has been outperforming both emerging and frontier markets for several years.
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| Pakistan GDP, CAD Source: Economist |
In 2014, the KSE-100 Index gained 6,870 points thereby generating a handsome return of 27% (31% return in US$ terms), making Pakistan's KSE world's third best performing market. Total offerings in the year 2014 reached 9 as compared to 3 in the year 2013. After a gap of seven years, Rs 73 billion were raised through offerings in 2014 as compared to a meager Rs 4 billion raised in 2013. Foreign investors, that hold US$ 6.1 billion worth of Pakistani shares -which is 33% of the free-float (9% of market capitalization)-remained net buyers in 2014.
The ETF fact sheet shows that the index has 31 holdings in it. Also, the industry weightings are concentrated in financials (32.7%), energy (24.2%), materials (23%) and utilities (10.8%) — roughly 90% in four sectors alone.
The top equity holdings with weightings in the ETF are as follows: MCB Bank, 11.5% Oil and Gas Development (OGDC), 9.8% United Bank, 6.1% Fauji Fertilizer, 5.9% Lucky Cement, 5.7% Hub-Power, 4.9% Pakistan State Oil, 4.8% Engro, 4.7% Bank Al-Habib, 4.1% National Bank Pakistan, 3.7%
Pakistani Shares Valuation:
Even after outperforming both emerging and frontier market indices, Pakistani shares can be bought at deep discounts which make them very attractive, according to Renaissance Capital’s chief economist Charles Robertson. MSCI (Morgan Stanley Composite Index) Pakistan trades at only 8.4 times forward earnings, a 17% discount to MSCI Frontier Markets. For comparison purposes, fellow frontier south Asia markets Sri Lanka and Bangladesh trade at 13.4x and 21.4x respectively. India, included in the emerging market index, trades at 16.8 times.
Key Sectors:
Chinese investment in energy and infrastructure will help stimulate all sectors of Pakistani economy. But the sectors benefiting most from the $46 billion investment will likely include banks, energy and building materials, the sectors which are the favorites of Pakistani billionaire investor Mian Mohammad Mansha.
Being close to the ruling Sharif family makes Mansha the ultimate insider. Beyond his investments in banking, cement, energy and textiles, Mansha is also starting to invest in consumer products sector benefiting from rising incomes, growing middle class and increasing jobs created in Pakistan by the massive Chinese investment. Mansha owns a big chunk of Muslim Commercial Bank (MCB) shares. He has recently been pumping more money into energy, cement and dairy businesses. Mansha's DG Khan Cements has announced plans to build a $300 million cement plant near Karachi. In additions, his Nishat Dairies has imported thousands of dairy cows for a dairy farm in Lahore.
Summary:
The $46 billion Chinese investment in energy and infrastructure has brought attention to tremendous investment opportunities in Pakistan, a nation of nearly 200 million people with rising middle class and growing consumption. Pakistani military's recent successes against the terrorists and China's massive investment commitments are expected to boost investor confidence in the country. Higher confidence will help draw other significant investors to invest in Pakistan over the next several years.
Full Disclosure: I have personally invested in PAK ETF.
Related Links:
Haq's Musings
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
Even after outperforming both emerging and frontier market indices, Pakistani shares can be bought at deep discounts which make them very attractive, according to Renaissance Capital’s chief economist Charles Robertson. MSCI (Morgan Stanley Composite Index) Pakistan trades at only 8.4 times forward earnings, a 17% discount to MSCI Frontier Markets. For comparison purposes, fellow frontier south Asia markets Sri Lanka and Bangladesh trade at 13.4x and 21.4x respectively. India, included in the emerging market index, trades at 16.8 times.
Key Sectors:
Chinese investment in energy and infrastructure will help stimulate all sectors of Pakistani economy. But the sectors benefiting most from the $46 billion investment will likely include banks, energy and building materials, the sectors which are the favorites of Pakistani billionaire investor Mian Mohammad Mansha.
Being close to the ruling Sharif family makes Mansha the ultimate insider. Beyond his investments in banking, cement, energy and textiles, Mansha is also starting to invest in consumer products sector benefiting from rising incomes, growing middle class and increasing jobs created in Pakistan by the massive Chinese investment. Mansha owns a big chunk of Muslim Commercial Bank (MCB) shares. He has recently been pumping more money into energy, cement and dairy businesses. Mansha's DG Khan Cements has announced plans to build a $300 million cement plant near Karachi. In additions, his Nishat Dairies has imported thousands of dairy cows for a dairy farm in Lahore.
Summary:
The $46 billion Chinese investment in energy and infrastructure has brought attention to tremendous investment opportunities in Pakistan, a nation of nearly 200 million people with rising middle class and growing consumption. Pakistani military's recent successes against the terrorists and China's massive investment commitments are expected to boost investor confidence in the country. Higher confidence will help draw other significant investors to invest in Pakistan over the next several years.
Full Disclosure: I have personally invested in PAK ETF.
Related Links:
Haq's Musings
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
26 comments:
In his first state visit to Pakistan last week, China’s President Xi Jinping pledged $46 billion to build a 3,000-kilometer (1,860-mile) economic corridor linking China’s restive west to Pakistan’s southwest port on the Arabian Sea. It is by far Beijing’s biggest bet on another developing country.
Earlier this month, Pakistan raised $1 billion from the sale of a big stake in its largest commercial bank, Habib Bank (ticker: HBL.Pakistan). Demand was overwhelming, and three-quarters of the shares went to foreigners, mostly long-term institutional investors.
We associate Pakistan with terrorism and sectarian violence. But China’s leaders are practical and business-minded: Are we missing something?
In many ways, Pakistan’s prospects look brighter today than they have in a long time; in fact they’re similar to those of its bitter rival, India. Growth has ticked up, from 3.7% in 2013 to 4.1% last year. Like India, Pakistan recently got nods of approval from the International Monetary Fund and Moody’s, with the former lifting its GDP forecast to 4.3% this year and 4.7% next, and the latter raising Pakistan’s credit outlook to positive from stable. Pakistan almost halved its budget deficit to 4.7% of GDP last year, and is now targeting 4%.
Lower oil prices also help Pakistan. Inflation hit a new low of 2.5% in March, down from 8.5% a year earlier. In March, Pakistan’s central bank cut its key interest rate to 8%, with another reduction possible.
The major concern is, of course, security. While falling, the number of civilian fatalities from terrorist attacks still totaled 1,781 last year. That was a seven-year low. So far this year, there are 352 fatalities.
INVESTORS WILL USUALLY PAY a premium for structural reform. On this count, “Pakistan ticks many of the boxes” but is not getting the love, says Renaissance Capital’s chief economist, Charles Robertson. It trades at only 8.4 times forward earnings, whereas investors’ darling India fetches 16.8 times.
Much of the shortfall is Pakistan’s fault. During the financial crisis in 2008, Pakistan suspended stock trading, only to see a sharp selloff upon re-opening. The episode prompted indexer MSCI to downgrade the country from emerging to frontier market. If operating normally, the Karachi Stock Exchange, with a market valuation above $70 billion, and $140 million in daily trading volume, would qualify as an emerging market. Over 25 stocks generate more than $1 million in daily trades.
Stocks have done very well since the shutdown. They’ve risen an annualized 26% over five years. Last week, Global X launched the first U.S.-listed Pakistani exchange-traded fund, Global X MSCI Pakistan, under the ticker PAK.
Pakistani cement makers, beneficiaries of infrastructure spending, are a good bet, says Asha Mehta, frontier markets portfolio manager at Acadian Asset Management. Pioneer Cement (PIOC.Pakistan), for example, expanded its operating margin from 27% in 2012 to 34% in 2014 and trades at only 7.7 times earnings.
Pakistan isn’t for the faint-hearted. In March, its market fell 10% in five days because of one investor: Miami-based Everest Capital unloaded around $70 million to cover a bad bet on the Swiss franc, and local sell orders ballooned from resulting margin calls and panic. Though Pakistan’s stock market recovered, it’s unlikely that such an event could occur in India’s bigger, more mature market.
http://online.barrons.com/articles/global-investors-rediscover-pakistan-1429925134
http://www.thehindu.com/news/international/iran-backs-chinas-inclusion/article7138630.ece
Iran has jumped decisively on the “belt and road” bandwagon, flagging its interest in linking China with its proposed natural gas pipeline to Failed-State Pakistan.
Iran’s Press TV is reporting that China has signed an initial agreement to construct the pipeline from Gwadar to Nawabshah in the southwest of Failed-state Pakistan.
Analysts say that extension of the Iran- Pakistan pipeline to China will be a blow to Super-power India, which had pioneered with Iran, the concept of the an Iran-Pakistan-India (IPI) peace pipeline in 1995. The Iranians have blamed India of dropping out of the project under pressure from the United States in 2009.
THOSE in search of a thriving stockmarket, a stable currency and low inflation would not normally pitch up in Pakistan. It is more readily thought of as a pit of instability than as a source of opportunity. Yet Pakistan is enjoying a rare period of optimism about its economy.
The IMF reckons that the economy will grow by 4.7% next year, the fastest rate in eight years. Consumer prices rose by 2.5% in the year to March, the smallest increase for more than a decade. Twice already this year the central bank has lowered its benchmark interest rate. Some indicators are pointing to an upturn in spending. Compared with a year earlier, cement sales, which are a guide to how much construction is taking place, rose by 5.5% from July to March. Car sales rose by 22% over the same period.
A fall of two-fifths in the oil price is a huge slice of luck for a country such as Pakistan. It relies on imported fuel oil for two-fifths of its power supply and is prone to periodic balance-of-payments crises (see chart). The country’s import bill can easily overwhelm the foreign-exchange earnings from textile exports and the remittances that Pakistanis working in the Middle East and Europe send home. In 2013-14 Pakistan’s net import bill for oil came to $12.6 billion, or around 5% of GDP. But if oil prices stay low, Pakistan could save a total of $12 billion in the next three years, says the IMF. The money could be spent on things with more local content and give the economy a lift.
The government of Nawaz Sharif takes some credit for the economy’s new stability. It has stuck to an IMF programme agreed to in 2013, a few months after it came to power in Pakistan’s first-ever handover from one civilian government to another. Foreign-exchange reserves have more than doubled, to $17.7 billion. Electricity tariffs have been raised, and some unpaid bills collected, easing the cash burden on hard-pressed distribution companies. Tax receipts have risen, albeit from pitiful levels, in response to efforts to broaden the base and cut exemptions. The revenue agency has sent over 150,000 tax notices to non-payers. More retailers are being drawn into the indirect-tax net. A draft budget aims to bring the budget deficit below 4% of GDP in 2015-16, from a peak of over 8%.
A privatisation drive that stalled last June resumed in April, when the government sold its stake in Habib Bank, the country’s largest lender, for $1 billion. Three-quarters of bids came from foreign investors. Pakistan’s stockmarket has doubled in dollar terms since the start of 2012, thanks in large part to such foreign interest. Privatisations will only add to the market’s variety and appeal. Listed companies are highly profitable, although in part because they often face too little competition.
Visitors to Pakistan are surprised to discover good roads and a strong business culture. The country is mid-table in the World Bank’s ease-of-doing-business rankings, well above India. The infrastructure is solid enough to support big fast-food chains: McDonald’s, KFC, Pizza Hut and Subway have 187 outlets between them, more than in all of Sub-Saharan Africa’s “frontier” economies combined, says Daniel Salter, of Renaissance Capital, a stockbrokers.
The progress in providing economic stability is encouraging. But Pakistan needs sustained growth of 5-7% a year if it is markedly to cut poverty—at the last count, nearly a quarter of Pakistanis were below the poverty line. There are doubts to whether Mr Sharif has the strength and authority to implement deeper reforms. Despite a better electricity industry, power shortages remain a bugbear. Big firms in textiles, which account for over half of Pakistan’s exports, have long taken to generating their own electricity.
http://www.economist.com/news/asia/21650175-lower-oil-prices-prove-be-boon-fuel-injection
Standard & Poor’s raised Pakistan’s credit rating outlook to positive from stable, as lower energy costs and an IMF loan boost growth and improve finances.
“The positive outlook reflects our expectations of Pakistan’s improved economic growth prospects, fiscal and external performance, and the supportive relationship of external donors over the next 12 months,” the company said in a statement on Tuesday.
It affirmed its B- rating, which is among the so-called junk grades, and raised the 2015-2017 average growth projection to 4.6 percent from 3.8 percent. Risks include higher oil prices, weakness in key trading partners and violence, S&P said.
The move follows a similar step by Moody’s Investors Service in March as Prime Minister Nawaz Sharif looks to resolve Pakistan’s crippling power shortages and boost investment. The nation’s foreign exchange reserves have almost doubled to $12.6 billion with the help of an International Monetary Fund loan and its stocks are among Asia’s best performers this quarter.
“Foreign inflows can be expected in the country and more dollars would mean more economic stability,” Saad Khan, an economist at Arif Habib Ltd. said by phone from Karachi after the upgrade.
The benchmark KSE100 index has risen 10.7 percent this quarter, trailing only Chinese and Hong Kong equities, according to data compiled by Bloomberg. The gauge fell 0.8 percent as of 12:24 p.m. in Karachi on Tuesday and Pakistan’s rupee was little changed.
China Pledge
China pledged $45 billion for roads, ports and power plants when President Xi Jinping visited Pakistan last month. The planned investment, 28 times more than the foreign direct investment Pakistan received in year ended June, will spur investment activity and help ease the country’s growing energy shortage, Moody’s said in a report on Monday.
Pakistan took a $6.6 billion loan from the IMF in 2013 to avert a balance-of-payments crisis and has cleared six program reviews. Oil prices have fallen 38 percent over the past year, lowering Pakistan’s import bill, easing price pressures and giving the central bank room to cut interest rates.
S&P forecasts Pakistan will report an average budget deficit of 3.5 percent of gross domestic product during 2016-2019 with interest costs falling to about 25.5 percent of revenues from an estimated 30.6 percent in 2015. Inflation is expected to average 4.8 percent over 2015-2019.
http://www.bloomberg.com/news/articles/2015-05-05/pakistan-outlook-upgraded-at-s-p-as-oil-imf-loan-boost-economy
“We are now seeing growing stability in the economy,” he (State Bank of Pakistan Governor Wathra) says in an interview with the Financial Times.
The IMF has acknowledged that Pakistan averted a balance of payments crisis in 2013 and managed to stabilise its foreign reserves. This week Standard & Poor’s, the credit rating agency, raised the outlook for its B minus rating from stable to positive, while Moody’s last month raised its outlook to stable from negative — albeit for a Caa1 rating, which puts it one notch above Greece.
With liquid foreign reserves having grown almost fourfold in the past year to $12.5bn, a figure equivalent to about three months of imports, Mr Wathra has less cause for concern about the stability of the rupee than some of his predecessors.
The recent plunge in the price of crude has seen the cost of oil imports fall to $9.7bn in the nine months to March, down from just over $11.2bn a year earlier, according to central bank figures.
Falling oil prices have also helped lower the fiscal deficit to an expected 5 per cent of gross domestic product in the year to June, down from above 8 per cent just over two years ago. And the country’s GDP is forecast to grow by about 4 per cent this year, following a similar rise last year.
But the government’s critics say the recent strong economic performance owes more to luck and a falling oil price than design.
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One western economist says that up to 25 per cent of the electricity generated in Pakistan “is lost and unaccounted for in the transmission system. It’s the most visible theft of a valuable resource in Pakistan.”
Other risks remain. Pakistan’s economy is vulnerable to foreign policy — both its own and that of others. Tensions have mounted over the country’s reluctance to provide ground troops, naval assets and fighter jets to Saudi Arabia to join its offensive inYemen.
Some even fear that up to 2m Pakistani expatriate workers in Saudi Arabia could be repatriated — an unlikely but devastating outcome given the billions of dollars of remittances they send home every year.
Even as he welcomes the boost provided by the lower price of oil, Mr Wathra acknowledges the foolhardiness of relying on it to boost the Pakistani economy. “Why,” he asks, “should we rely on a factor which can be unpredictable and not in our control?”
http://www.ft.com/intl/cms/s/0/ed016c7c-e4df-11e4-bb4b-00144feab7de.html
Is Pakistan the most exciting place to live in the 21st century? It’s almost as if someone has unleashed good news for the country on all fronts; economic, political and security. Over $40 billion in Chinese investment are on their way but more importantly a bet by the world’s next superpower to tie its regional ambitions to Pakistan’s prosperity. This is a game-changing Marshall plan of sorts that appears too good to be true. On security, the army, civilian leadership and civil society are steadily taking the battle to religious extremists instead of indulging in in-fighting and appearing like sitting ducks. On politics, a stunning election took place in Karachi last month, on the hottest of seats, but the result was respected by all parties as the polls were largely free and fair. Rewind a few months back when the country was about to unravel on rigging allegations. Who are you and what have you done to my country that it couldn’t get anything right?
As a wise man once said, abhi tau party shuru hui hai. Fuel and electricity prices have steadily declined in Pakistan over the last few months and we sit on the cusp of a consumer spending bonanza that will fuel the informal economy. Both consumers and producers will see their bottomlines improving behind lower fuel prices and subdued inflation. More importantly, this isn’t a cheap credit-driven bubble that will burst anytime soon (unless fuel prices rise abruptly). There is another geo-political prize in the making. Iran and America are flirting with the idea of becoming friends. If this happens, sanctions could be lifted and Pakistan could finally get cheap gas from Iran to overcome domestic shortages. A big, hungry market may also open up next door and we could potentially import cheaper oil too. If this isn’t enough, international cricket is returning to Pakistan, too. Who are you and what have you done to the country that was destined to become a failed state?
Before you dismiss me as someone in denial about the gravity of Pakistan’s real problems, let me clarify that the purpose of this article isn’t to argue that Pakistan doesn’t have serious problems. The purpose of this article is to argue that Pakistan is more than the sum of its problems. Several bright spots are beginning to emerge in the country but no one is connecting the dots. When it comes to declaring Pakistan a failed state, the mainstream media is quick to connect the dots and focus hysterically on doomsday scenarios that drive ratings. But no one wants to talk about a confluence of positive economic, geo-political, security and political factors that are setting up Pakistan for success by firmly nudging us in the right direction. How dare you, Pakistan? Who are you and what have you done to the country where hopelessness had defeated hope itself?
Pakistan may not be the richest country to live in the 21st century. It may not be the safest country to live in the 21st century. But it may just be the most interesting country to live in the 21st century. Consider this: the Pakistani people are frontline warriors in the greatest ideological battles of the 21st century, including the battle against religious extremism.
http://tribune.com.pk/story/882045/why-pakistans-future-looks-bright/
Summary
India is considered by some to be the best emerging market for several reasons and the one to buy.
The favorable environment for India is passing and the new one contains a great deal of headwinds.
India is not a buy in my assessment once you take everything into account.
Of all the emerging markets that are out there, India is one of the more prominent ones. It's one of the BRIC countries, together with Brazil, Russia and China. India easily ranks as one of the more popular investment destinations among emerging markets. In fact, there are a large number of people who consider India as their number one pick when it comes to deciding where to invest in emerging markets.
Why some people may want to invest in India
There are many reasons why India is currently a favored destination among some investors. India is an economy with relatively fast growth, at least in comparison to most countries out there. It also has a very large and a fairly young population. India has the potential to one day become a leading economy and a large consumer of all sorts of goods and services. Investing early on could pay off handsomely some day.
Unlike many other emerging markets, India does not depend on the export of commodities. On the contrary, India is a major importer of commodities such as crude oil and gold. The big drop in commodity prices starting in 2014 has therefore not hurt India, in contrast to other emerging markets that have experienced much turmoil due to the drop in prices of commodities.
The year 2014 also saw the election of the Modi government, which is considered by many to be friendly to businesses and open to reform. This factor along with others combined to generate a lot of optimism about the future and India became one of the best performing markets in 2014 as investment capital poured into the country.
The winds are changing direction
However, in a couple of days it will be exactly one year since the new government in India was elected. India will at some point have to turn some of its election promises into action. It cannot rely on being given the benefit of the doubt because its honeymoon period is now pretty much over. The government will be judged on what it's able to accomplish and not just what it says it's going to do.
Unfortunately, some of the early signs are not very promising. For instance, foreign companies and investors are still in the dark concerning potential tax payments that no one was informed of but will still be held liable for. The Indian government has not done enough to resolve this and other outstanding issues. Frankly, the Indian government has little if anything to show for with its one year anniversary coming up.
Furthermore, the price of crude oil has stopped declining. If it continues to rebound, other commodities could follow suit because the price of oil plays an important role when it comes to extracting commodities from the ground. This is a significant development for India because crude oil accounts for about one third of its import bill.
The declining price of crude oil was thought by many to be the reason for optimism because it would allow India to turn its current account deficit into a surplus. This has yet to happen and the rising price of crude oil makes that possibility more and more unlikely. The deficit could actually increase instead of decline as some had forecast.
It's important to remember that India has a number of weak fundamentals. India has a problem with chronic deficits, including a current account deficit, a trade deficit and a budget deficit. The deficits force India into borrowing, which is not a good situation to be in at this moment. Interest rates are looking to go up, which means that India will have to pay more for its borrowing. You do not want to pay more if you're already short on cash.
http://seekingalpha.com/article/3182786-why-india-is-not-a-buy-in-the-current-environment
The (Pakistan) government accepted on Monday it had missed economic growth target for this fiscal year because of the underperformance of agriculture and industrial sectors.
The economy grew at the rate of 4.24 per cent as against the projected target of 5.1pc for 2014-15. Last year the target was 4.4pc, but the growth rate was 4.03pc.
The matter was discussed in the meeting of the National Accounts Committee (NAC) held on Monday.
Out of 20 key growth indicators, the NAC documents showed only 10 were on target. In March 2015, the Asian Development Bank Outlook projected moderate growth in Pakistan at 4.2pc in FY15 and 4.5pc for FY16.
The ADB attributed the low growth to slow pace of reforms in energy, taxation and public sector enterprises.
The NAC cited minor crops, livestock, fishery, small-scale manufacturing, slaughtering, construction, general government services, finance and insurance as key drivers of growth in 2014-15.
The growth rate, however, is provisional as final numbers for full year will firm up later. The agriculture sector posted growth of 2.88pc against 3.3pc target in 2014-15. Last year the sector grew by 2.69pc. Major crops recorded a paltry growth of 0.28pc against the target of 1.5pc.
The worrisome factor is that yield of some crops posted negative growth. The wheat production was projected at 25.478 million tonnes for this year as against 25.979 million tonnes last year, a decline of 1.93pc.
The sugarcane yield declined by 7.13pc, maize by 5.04pc during this fiscal over the same period last year.
There is fear that low yield of minor crops could lead to higher food inflation. Livestock, the second largest sub-sector of agriculture, posted a growth of 4.12pc against the target of 3.8pc. The fishery sector expanded 5.75pc as against 0.98pc last year. And forestry exhibited a growth of 3.15pc against a negative growth of 6.74pc last year.
The industrial sector posted a growth of 3.62pc against the target of 6.8pc in 2014-15. Last year it grew by 4.45pc. Of these the mining and quarrying sector recorded a growth of 3.84pc against the target of 6.5pc. The manufacturing recorded a growth of 3.17pc down from 4.46pc last year. The projected target was 6.9pc.
The LSM posted a growth of 2.38pc against the target of 7pc, small-scale manufacturing 8.24pc against the target of 8.4pc and slaughtering 3.32pc against the target of 3.6pc.
The growth in construction sector was 7.05pc compared to 7.25pc last year. And supply of electricity, and gas also depicted a growth of 5pc against a negative growth of 26.38pc last year. The services sector grew at 4.95pc in 2014-15. Last year it grew by 4.37pc.
The major contributors were the general government services, which grew by 9.44pc, finance and insurance 6.18pc, housing services 4pc, transport 4.21pc and wholesale and retail trade 3.38pc this fiscal year over the last year.
http://www.dawn.com/news/1182817/farm-industry-pull-growth-down
#Pakistan’s Biggest IPO planned in 8 Years. Steelmaker to raise 4 billion rupees. http://bloom.bg/1AykBAV via Cpec Neuquen
Pakistan Prime Minister Nawaz Sharif’s push to build power plants, roads and rail links is prompting a local steelmaker to expand by selling shares in the nation’s biggest initial public offering in eight years.
Amreli Steels Ltd., the South Asian country’s biggest maker of steel bars used in construction, plans to raise as much as 4 billion rupees ($39 million) next month from the sale of 70 million new shares. The proceeds will help more than double its capacity to 450,000 tons from 200,000 tons, Amreli’s director Hadi Akberali said in an interview.
The steelmaker is betting on a potential boom in demand for the alloy as the $232 billion economy expands at the fastest pace in eight years, fueled by higher remittances and consumer spending. Last month, China signed deals for $28 billion of investments in Pakistan as part of a planned $45 billion economic corridor that includes power plants and dams.
“When your GDP is growing, your steel demand grows in multiples,” Akberali said. “If the Pakistan-China economic corridor takes off, even if we double or triple our capacity, I think it still won’t be enough.”
Second Best
Amreli’s share offer also comes amid gains in the benchmark Karachi 100 Index, which, according to data compiled by Bloomberg, is the world’s second-best performer in the past six years. The gauge may rally 52 percent in the next two to three years, Stockholm-based Tundra Fonder AB fund manager Shamoon Tariq predicted in an April interview.
The benchmark index fell 0.3 percent to 32,749 as of 11:36 a.m. in Karachi. This year, it has climbed 2 percent.
The company will raise between 2 billion rupees and 4 billion rupees, depending on the final price, Akberali said, adding he expects strong demand. AKD Securities Ltd. and Bank Alfalah Ltd. will be the advisers on the transaction.
A 4 billion-rupee IPO would be the biggest in Pakistan since Habib Bank Ltd. raised 8.1 billion rupees in 2007, according to data compiled by Bloomberg. The number of initial share offerings rose to five in 2014, the most in six years, according to data compiled by Bloomberg.
“This clearly shows companies have the confidence to raise funds through the equity market,” said Muhammad Imran, a fund manager at NBP Fullerton Asset Management, which oversees 57 billion rupees in stocks and bonds in Karachi. “A new listing will also improve the depth of the market and choices.”
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“We are looking at big infrastructure spending,” Akberali said. “Steel is very strongly linked to economic growth.”
#Karachi #Pakistan's K-electric sells country's largest Islamic bond "corporate sukuk" http://reut.rs/1I3c9JP via @Reuters
Karachi-based utility K-Electric has sold 22 billion rupee ($215.9 million) worth of seven-year Islamic bonds, the largest listed corporate sukuk in the country, the firm said in a bourse filing.
Issuance of corporate sukuk is gathering pace, helping broaden Pakistan's Islamic capital market, which in recent years has relied on the government for the bulk of such deals.
Proceeds would help refinance debt including around 18 billion rupees of long term loans from the International Finance Corporation and the Asian Development Bank, K-Electric said without giving pricing details.
In February, the firm received 15 billion rupee worth of subscriptions for the sukuk through a pre-IPO offering, opening it to the general public last month.
The deal was oversubscribed on May 29, the first day of subscription for institutional investors, and will be listed in the Karachi stock exchange later this month, the firm said.
Previously, Pakistan's largest corporate sukuk was Liberty Power's 12-year, 13.5 billion rupee transaction done in 2009. ($1 = 101.9100 Pakistani rupees) (Reporting by Bernardo Vizcaino; Editing by Shri Navaratnam)
#Pakistan gets a boost with #Moody's rating upgrade to B3, Big REIT launch, #MSCI upgrade review http://on.wsj.com/1GBtiLF via @frontiermarkets
Pakistan had a good week. Index provider MSCI surprised many observers by announcing that the South Asian nation will be included in MSCI’s 2016 review for potential upgrade to emerging markets status.
Later in the week, investors pounced on the opportunity to buy into Pakistan’s first real estate investment trust in a heavily oversubscribed IPO. And ratings agency Moody's MCO -0.04% upgraded the country’s foreign currency ratings to B3 from Caa1, citing “continued strengthening of the external payments position and sustained progress in structural reforms under the government’s program with the IMF.”
http://blogs.wsj.com/frontiers/2015/06/13/this-week-on-the-frontiers-pakistans-pleasant-surprise/
World Bank Report: #Pakistan attracting millions of foreign workers from abroad
http://www.asiadespatch.org/2015/06/14/pakistan-providing-a-doorway-for-foreign-workers/ …
A report by the World Bank (WB) and International Fund for Agricultural Development (IFAD) reveals that, Asia and the Pacific are on the onset of new economic growth patterns, countries like Hong Kong, Japan, Singapore are on the lead to attract the foreign workers . Like wise Malaysia and Thailand are now “net importers” of labour, countries like Pakistan and India are also attracting millions of workers from abroad
One very disturbing aspect of TISA is the document uncovered by WikiLeaks revealing an entire section on immigration, referred to as “Movement of Natural Persons.” This section discusses commitments by the parties not to place undue burdens on visas and singles out face-to-face interviews as an example of “overly burdensome procedures.” [see the footnote on page 7] At a time when we face so many national security problems, why would conservatives trust this president to squelch any visa provision threatening our security?
And guess who is a party to TISA?
Pakistan! In addition to the massive immigration from Pakistan, we admitted 78,000 Pakistani nationals on some type of visa in 2013. Do we really want to join in an agreement that could loosen restrictions on visas from Pakistan?
Guess which other country is a part of TISA? Mexico! For good measure, Turkey is also a party to TISA. What could go wrong?
There is a lot of hype being thrown around about some of these treaties, but the WikiLeaks document on TISA is very believable because service industries, the tourism industry in particular – hate all restrictions on visas. Their opposition is certainly understandable, but that is the price we must pay when scrutinizing visas from volatile and dangerous parts of the world.
- See more at: https://www.conservativereview.com/commentary/2015/06/obamatrade-relaxes-visa-process-for-pakistan#sthash.tphs4xGZ.dpuf
The problem with TISA, as it’s currently being negotiated, is that under its terms, America (and any other signatory nation) would be prohibited from controlling which nation stores your personal data. Let’s say you keep your medical records stored in the cloud with a Google application. Right now, your medical data has to be stored within the United States, with all its privacy protections. But under TISA, it won’t have to be. Google could outsource its data storage to, say, Pakistan, and you would have to rely on the government of Pakistan to protect your privacy. That ought to concern you.
The key language in TISA is this: “No Party may require a service supplier, as a condition for supplying a service or investing in its territory, to: (a) use computing facilities located in the Party’s territory.”
Your data, in other words, could be stored anywhere, and subject to any level of protection the host country believes it should have.
Read more: http://www.americanthinker.com/blog/2015/06/can_you_trust_other_countries_to_store_your_data_you_might_have_to.html#ixzz3d6CEaB2n
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Although facing institutional and capacity constraints as in many developing countries, Pakistan has been actively involved in the GATS negotiations by pursuing a strategy of “critical engagement” recognising the positive role that services liberalisation can play by improving the competitiveness of the goods sector and other services, as well as increasing export opportunities and improving the efficiency of domestic services. Pakistan has received several requests from its trading partners and has also tabled some. In order for Pakistan to strengthen both the multilateral and bilateral negotiating process for services, the study suggests the formalisation of a “bottom-up” consultation mechanism incorporating national stakeholders.
The present study, produced in collaboration with the Lahore University of Management Sciences, identifies construction and related engineering services, architecture, engineering and integrated engineering services, energy services and environmental services as priority sectors, and the temporary movement of natural persons (Mode 4) as a priority mode of supply for Pakistan. The construction sector, which represents a fundamental activity in Pakistan with strong forward and backward linkages, is seen to have potential import and export interest. Further liberalisation in the environmental services sector, including waste collection and recycling, would also benefit Pakistan. However, removal of existing restrictions on Mode 4 is seen to be of the greatest potential interest to Pakistan. This study comes at an opportune time for Pakistan in implementing concerted measures for macroeconomic stabilisation and structural reforms as its economy advances towards a higher degree of openness and export orientation. In this context, it provides a timely backstopping analysis for the definition of its negotiating interests in bilateral, regional and multilateral negotiations.
http://www.ictsd.org/themes/services/research/opportunities-and-risks-of-liberalising-trade-in-services-in-pakistan
Excerpts of Economic Survey of Pakistan 2014-15:
The share of the services sector has reached to 58.8 percent in 2014-15. Services sector contains
six sub-sectors including: Transport, Storage and Communication; Wholesale and Retail Trade;
Finance and Insurance; Housing Services (Ownership of Dwellings); General Government
Services (Public Administration and Defense); and Other Private Services (Social Services).
The Services sector has witnessed a growth rate of 4.95 percent as compared to 4.37 percent last
year. The growth performance in services sector is broad based, all components contributed
positively in growth, Finance and Insurance at 6.1 percent, General Government Services at 9.4
percent, Housing Services at 4.0 percent, Other Private Services at 5.9 percent, Transport, Storage
and Communication at 4.2 percent and Wholesale and Retail Trade at 3.4 percent.
The agriculture sector accounts for 20.9 percent of GDP and 43.5 percent of employment, the
sector has strong backward and forward linkages. The agriculture sector has four sub-sectors
including: crops, livestock, fisheries and forestry.
The industrial sector contributes 20.30 percent in GDP; it is also a major source of tax revenues
for the government and also contributes significantly in the provision of job opportunities to the
labour force.
Industrial sector continued growth process and recorded growth at 3.62 percent as compared to
4.45 percent last year.
The manufacturing is the most important sub-sector of the industrial sector comprising 65.4
percent share in the overall industrial sector. Growth of manufacturing is registered at 3.17
percent compared to the growth of 4.46 percent last year.
Manufacturing has three sub-components; namely the Large-Scale Manufacturing (LSM) with the
share of 80 percent, Small Scale Manufacturing with the share of 13 percent and Slaughtering
with the share of 7 percent.
Small scale manufacturing witnessed growth at 8.24 percent against the growth of 8.29 percent
last year and slaughtering growth is recorded at 3.32 percent as compared to 3.40 percent last
year.
LSM has registered the growth of 2.38 percent as compared to the growth of 3.99 percent last
year.
The share of construction in industrial sector is 12 percent and is one of the potential components
of industries. The construction sector has registered a growth of 7.05 percent against the growth
of 7.25 percent of last year.
http://www.finance.gov.pk/survey/chapters_15/Highlights.pdf
After years of boosting global growth, developing economies now a major drag on world economy
It was only five years ago, but it feels like a different era. Roger Agnelli, the then chief executive of Vale, the Brazilian mining company, had just taken delivery of the first of an order of 35 Valemax ships, the biggest dry bulk carriers ever built. The vessels, bought primarily to ship iron ore to a voracious China, were so large that each one could carry iron ore sufficient for the steel to build the Golden Gate Bridge in San Francisco three times over.
“We are living through our best days . . . I strongly believe that even better days are ahead of us,” said Mr Agnelli in 2010. But Vale’s fortunes would soon begin to fade. Mr Agnelli was ousted a year later, and China temporarily banned the ships from its ports on safety grounds. In the first quarter of this year, the company reported its worst financial performance in six years.
Vale’s problems are symptomatic of a broader malaise, with emerging markets slumping in the first quarter to their weakest performance since the 2008-09 crisis. China’s appetite for metal ores and other resources is on the wane, Brazil’s once-buoyant economy is in recession, Russia is in crisis and several smaller countries are also suffering declining growth and capital outflows.
The worry is that these problems are no longer contained within emerging market economies; they are spreading to the developed world too. The dependable boost that the global economy has derived from the youthful dynamism of its developing countries for well over a decade — with the exception of during the global financial crisis — has recently become an outright drag. The Bric countries (Brazil, Russia, India and China) — long seen as the world’s growth engine — are now a particular burden.
http://www.ft.com/intl/cms/s/2/2a6c3d6a-0f62-11e5-897e-00144feabdc0.html?ftcamp=traffic/social_promo/emerging_markets_trading_blow_12June/facebook_US_Core/essence/auddev&utm_source=facebook_US_Core&utm_medium=social_promo&utm_term=emerging_markets_trading_blow_12June&utm_campaign=essence#axzz3e6PYjgZM
#China’s Market Intervention & #Pakistan Lesson: Global Ponzi Denouement?
http://blogs.barrons.com/emergingmarketsdaily/2015/07/10/chinas-market-intervention-pakistan-lesson-global-ponzi-denouement/ … via @barronsonline
For investors, the net affect of China’s actions relieved some of the pain, at least among some China-focused exchange-traded fund returns this week: The Deutsche X-trackers Harvest CSI 300 China A-Shares Fund (ASHR) is up 5% today, and up more than 1% for the week. The fund is now up more than 15% year to date. The Market Vectors China ETF (PEK) is up 7% today and up 2% for the week, bringing its year-to-date rise to more than 17%. But the iShares MSCI China ETF (MCHI) hasn’t fared as well: while up 4.6% today, the fund is down 6.5% for the week, and up 3.6% for the year.
“Most investors seem to believe the [China] stock market bubble was officially sanctioned. Its ongoing collapse has destroyed the authorities’ credibility and could easily spill into the already enfeebled economy … The Chinese authorities including their central bank have now lost a huge amount of credibility with investors and bystanders alike. Unlike the western authorities whose reputation for economic management remains in tatters after presiding over the Global Financial Crisis (GFC) in 2008, the credibility of the Chinese authorities had remained high for their handling of the 2008 crisis.”
Pakistan, a country to which Edwards feels a “close affinity” because his father grew up in Karachi in the 1920s, offers important lessons in the China crisis. In sum, Edwards writes:
“In 1998 a ‘floor’ was put under the Karachi SE100 to stop its collapse. Unsurprisingly when trading resumed, the slump continued apace. The episode left the authorities’ reputation in tatters. …
The same loss of confidence in the omnipotence of the Chinese authorities will surely ultimately swirl westward. The Federal Reserve and the European Central Bank have created similarly grotesque stock market bubbles in an effort to shore up their anaemic economic expansions. Do not be surprised when the Standard & Poor’s 500 index collapses in exactly the same way as the Shanghai stock exchange, and don’t expect the panic monetary measures that will be enacted (more quantitative easing) to prevent the ultimate denouement of this global equity Ponzi scheme.”
Edwards offers this caveat: ”my thoughts here are entirely my own views and not the Societe Generale house view. I am the ‘Alternative View.’ I am merely a ‘teenage scribbler,’ as former UK Chancellor Nigel Lawson dismissively called his critics in the 1980s, when they dared to query the sustainably of his economic policies – which indeed ultimately turned out to be ruinous.”
State Bank of Pakistan (SBP) says Pakistan’s economy is set to embark on a higher growth trajectory due to implementation of stabilization policies and marked improvement in macroeconomic indicators.
In its Third Quarterly Report for the last financial year, the Bank noted that positive business sentiments are likely to strengthen real GDP growth in the current financial year.
The reports say SBP has already cut the policy rate to a historic low to support economic activity.
It says construction activity is set to gain from mega infrastructure projects especially China-Pakistan Economic Corridor, and growing private sector residential projects.
The Bank has expressed the confidence that after a long time, the investments are expected to revive as a result of the on-going campaign to eradicate terrorism, and positive assessment of the economy by multilateral institutions and credit rating agencies.
The Report says foreign direct investment would gain from inflows under CPEC.
http://www.radio.gov.pk/newsdetail/269/65
Summary
Developed and current emerging markets are not offerings returns as high as frontier markets.
Pakistan’s economic outlook is improving, thanks to China’s investment, low oil prices and rate cuts.
MSCI Pakistan is a decent bet for a frontier market exposure; it’s cheap on relative valuation.
Developed equity markets continue to trend higher. It is hard to predict the end of the current bull market, but the returns would be limited going forward. S&P trades at a PE of 21.24 while NASDAQ composite is trading around 23 times the trailing earnings. European markets are also rising but the upside seems limited given high multiples. Emerging markets are witnessing aslowdown in growth. High return investments are not easily found in the above mentioned markets under current circumstances. However, there are alternatives for investors with a high risk-appetite: the frontier markets.
Frontier markets are small to be classified under emerging markets but they often entail a higher return at a higher risk. One such frontier market is Pakistan, which has started to look attractive. Equity market of Pakistan is trading at a substantial discount and can bring considerable gains to investors. Detailed thesis follows:
Status of Pakistan might be upgraded to an emerging market.
Pakistan is up for consideration to be included in emerging markets. MSCI will review for a potential upgrade in June 2016. According to WSJ, Pakistan is liquid and deep enough to be considered as an emerging market. KSE 100 index is one of the best performing equity markets since the financial crisis of 2008. Note that Pakistan meets most of MSCI's emerging market requirements. It is highly likely that Pakistan will be upgraded to the emerging market status. If that happens, the PE multiple of Pakistan's equities will expand resulting in substantial gains for investors.
KSE 100 is one of the best performing equity markets trading at a discount.
In 2013, KSE 100 rose 37%, in dollar terms, topping S&P 500 and every other benchmark in Europe. It was the third best performing market in 2014 with a31% return. The index is up ~19% during the trailing twelve months. Despite the run, the index trades at 8.3 times forward earnings, an 18% discount to MSCI's frontier markets.
The economy is in a turnaround mode; related indicators are positive.
Economy is getting a boost from several developments. Falling oil prices are a big positive that are keeping a check on inflation. This, in turn, is allowing for rate cuts, which will give a boost to economic activity and the stock market. Pakistan is a net importer of oil; prices of oil are not expected to go up any time soon, think recent U.S.-Iran deal. Oil prices will continue to have a positive impact on the economy of Pakistan. As mentioned above, low interest will also boost the economy. Interest rates are cut by 1% to drop to 7%. The Government is pursuing aggressive rate cuts; they are down from 10% in November 2014 to 7%currently.
Other favorable factors include pro-business government and favorable demographics; 54% of the population of Pakistan is under 25 years. The current Government is heavily investing in infrastructure; a $500 million Metro transport project is recently completed in twin cities, Islamabad and Rawalpindi. Other construction projects are expected to boost materials and construction industry. Elimination of circular debt by the Government bodeswell for power producers. Further, consumer spending is increasing; 26% p.a. increase in spending was recorded (pdf) during 2010-2012 as compared to Asia's 7.7% growth. Analysts' expect the GDP to grow at 4.6% p.a. through 2019.
Pakistan's security forces' operation against terrorism is proving to be fruitful. Number of civilian casualties has declined by 81% since 2013. Number of drone attacks by the U.S. in Pakistan has decreased 62% since 2013 indicating that terrorist element is being eliminated efficiently.
http://seekingalpha.com/article/3343675-msci-pakistan-add-a-little-green-to-your-portfolio
Times of India Op Ed by Morgan Stanley's Head of Emerging Markets Ruchir Sharma on "The Quiet Rise of South Asia":
Together, India, Bangladesh, Sri Lanka and Pakistan are now growing at an average annual pace of close to 6%, compared to 2% for the emerging world outside China.
Due to their lower per capita income, it should hardly be surprising that South Asian economies are growing faster than other emerging markets. But that spread of nearly four percentage points is the largest in the region’s post-independence history. While hopes for a revival in India exploded when Prime Minister Narendra Modi took power in 2014, promising major economic reform, its smaller neighbours remained under the radar. Now, however, Bangladesh, Sri Lanka and Pakistan are leading the quiet rise of South Asia.
Since the global financial crisis, a number of emerging markets have been ramping up debt and government spending. But the smaller South Asian economies have largely avoided these excesses, so they still have room to boost growth. While falling prices for oil and other raw materials are hurting most emerging regions, they are a boon to the nations of South Asia, all of which are commodity importers.
The impact of low commodity prices is helping to keep inflation low even as growth accelerates, while countries like Brazil, Russia and South Africa face stagflation. Many emerging economies have been hurt by rising wages and have seen their share of global exports decline, but not Pakistan and Bangladesh. Their wages are still competitive, and they are increasing their share of global exports, even as growth in global trade is stagnating for the first time since the 1980s.
They are benefitting along with Sri Lanka as manufacturers look for cheaper wages outside of China, with wages in the manufacturing sector having increased by 370% in the world’s second largest economy over the past decade. Bangladesh is now the second leading exporter, after China, of ready-made clothes to the US and Germany.
And as China and Japan compete with India for influence in the Indian Ocean, they are pouring billions into new ports in Bangladesh, Pakistan and Sri Lanka. The upshot of these positive trends is that South Asia could sustain a growth rate of over 5% for the next few years, which would make it one of the fastest-growing regions in the emerging world.
The competition between Japan and China is a huge boost: after Beijing recently announced plans to build a $46 billion “economic corridor” connecting Pakistan to China, Japan beat out China for rights to build Bangladesh’s first deep-water port, at Matarbari. The inflow of foreign direct investment is helping to keep South Asia in what can be identified as the investment sweet spot: strong economies tend to invest between 25 and 35% of GDP. Sri Lanka and Bangladesh are now right in the sweet spot, at or near 30% of GDP.
Investment also tends to have the greatest impact on jobs and growth when it is going into manufacturing. Both Sri Lanka and Bangladesh have strong manufacturing sectors, representing 18% of GDP. Pakistan is much weaker, with investment at 14% and manufacturing at 12% of GDP. But Pakistan’s manufacturing sector is now growing, due to both increasing electric output and the fact that – like Bangladesh – its young population and labour force is expected to continue expanding for at least the next five years.
At a time when much of the workforce is entering retirement age in larger emerging nations including China, Korea, Taiwan and Russia, the positive demographic trends in South Asia are potentially a big competitive advantage. With exports and investment strong, Bangladesh is running a current account surplus, Sri Lanka is reducing a deficit now equal to 3% of GDP, and Pakistan has cut its current account deficit from 8% of GDP in 2008 to just 1%.
http://blogs.timesofindia.indiatimes.com/toi-edit-page/bucking-stagnation-elsewhere-the-quiet-rise-of-south-asia/
Forbes: Op Ed: #Pakistan Next Success Story. #economy, political stability, #China #FDI #development #returns http://www.forbes.com/sites/danielrunde/2015/08/03/pakistan-the-next-colombia-success-story/ …
Pakistan has the potential to be a global turnaround story. I recently spent time in-country listening to a wide range of perspectives and I am convinced that U.S. policymakers and business leaders need to look at Pakistan beyond the security lens. Getting our relationship right will require deeper thinking and action on issues around trade and investment, education, and broader economic development. The United States ought to be Pakistan’s preferred partner given its 70-year relationship. But in order to participate in the upside of the Pakistan story, the United States will need to view Pakistan not as a problem to be solved but as a potential partner. There are several changes that suggest the United States should soon act on this opportunity.
The Pakistan of today is similar to that of Colombia in the late 1990s. Back then, words like “drugs, gangs, and failed state” were freely associated with the Andean country. Today, Colombia has a free trade agreement with the United States, a stable 3.5 percent annual GDP growth, a free trade agreement with the United States, and security is vastly improved. Similarly, Western headlines on Pakistan today gloss over the progress on the security front, the increased political stability, and incremental progress on the economic front. In spite of this potential for Pakistan, it continues to suffer from a terrible country brand that has not caught up with realities on the ground.
Action Against the Taliban
Pakistan’s improving security dynamic is the first change to note. It is hard to understate the before-and-after effects of the Taliban’s horrendous December 2014 attack on a military-owned elementary school in Peshawar that killed 145 people, including 132 schoolchildren aged eight to eighteen. Almost immediately after the attack, the military responded in force by taking out 157 terrorists via air strikes and ground operations in the North Waziristan and Khyber tribal areas adjacent to Peshawar.
What has not sunk into international perceptions about the country is the tangible consensus among government, military, and Pakistani citizens against violent terrorists including the Pakistani Taliban and the alphabet soup of other terrorist groups in and around the country. ..
Political Stability
Prime Minister Nawaz Sharif is governing with a competent cabinet, a majority coalition, and is working in tandem with the military to deliver peace and security. Sharif was elected in Pakistan’s transition of power between democratically elected governments in April 2013 and so far, he has demonstrated enough of a commitment to democracy.
----
Better Luck Around the Corridor
Chinese investment is another reason why the United States should reassess its Pakistan calculus. Since Xi Jinping first announced the $46 billion China-Pakistan Economic Corridor (CPEC) in 2014, the project has quickly become the centerpiece of diplomatic relations between the two countries. CPEC will include highways, railways, and oil and gas pipelines – all constructed via Chinese companies.
A New Development Story
Pakistan has a population of 182.1 million people and is the 6th largest country in the world. Sixty percent of the population is of working age. By 2025, Pakistan’s total population will be 300 million, making it roughly ten times the size of Afghanistan. Pakistan is also among the world’s fastest urbanizing countries with half its people projected to live in cities by 2050. Twenty years ago, Islamabad, a planned city much like Brasilia, had a population of 400,000; today, it has a population of around 3 million including the peri-urban areas. Many Pakistani cities are undergoing a similar urbanization process, and this will create massive demands on food, energy, water, and consumer goods.
Dolmen City REIT, #Pakistan's First Real Estate Investment Trust) posts net profit of Rs169.9m http://tribune.com.pk/story/961071/maiden-earnings-dolmen-city-reit-posts-net-profit-of-rs169-9m/ …
KARACHI: In its maiden earnings announcement following the public listing in June, the management company of Pakistan’s first real estate investment trust (REIT) scheme said on Monday its net profit amounted to Rs169.9 million for the period ending on June 30.
Trading of the units of Dolmen City REIT, which is run by Arif Habib Dolmen REIT Management, began on the Karachi Stock Exchange on June 26, although the announced profit is for the period starting on January 20 and ending on June 30.
REITs are collective investment schemes that pool investors’ funds for onward investment in real estate.
No year-on-year comparison of Dolmen City REIT can be made because of the unavailability of comparable data.
Traditionally, small investors have been unable to take part in real estate investments in Pakistan, as the property market is considered highly illiquid and capital intensive. There are few publicly listed property developers in Pakistan while REITs had practically been non-existent so far.
However, as the first-of-its-kind investment avenue in Pakistan, Dolmen City REIT offers small investors the opportunity to take advantage of a booming real estate market by trading in REIT units.
Besides being the first REIT in Pakistan, Dolmen City REIT is also the first publicly listed trust of its kind in South Asia.
REITs operate like close-end funds, as pooled capital is invested in real estate and its units are listed on the stock exchange that investors can buy and sell every day just like ordinary stocks.
The underlying assets of Dolmen City REIT are the two components of the Dolmen City project: Dolmen Mall Clifton and the Harbor Front building, which are located on the Karachi seafront.
The property was originally owned by International Complex Project (ICP). The Arif Habib Group controlled 20% shares in ICP while 80% ownership rested with the Dolmen Group before the public listing. The monetary value of the total fund of Dolmen City REIT is Rs22.2 billion.
The property generates rental income that is distributed by the REIT scheme among unit holders in the shape of dividends. The first profit announcement was accompanied with a final cash dividend of Rs0.08 per unit for the period ended June 30.
Speaking to The Express Tribune, Arif Habib Dolmen REIT Management CEO Muhammad Ejaz said the trust was registered on January 20, but the rental income started accruing to Dolmen City REIT from June 1. Therefore, the rental income of Rs193.6 million, which resulted in the net profit of Rs169.9 million, was generated in the month of June alone, Ejaz said.
In a pre-IPO interview, Ejaz had said unit subscribers should expect a 9.25% dividend yield in the first year of operation.
#London #FTSE composite index includes six #Pakistan companies.Additional $57 million expected to flow into #Karachi
https://tribune.com.pk/story/1344303/ftse-includes-six-pakistani-companies-index/
KARACHI: The Pakistan Stock Exchange (PSX) continued to attract international attention, as six of its listings were taken on board by the Financial Times Stock Exchange (FTSE) index.
FTSE is a London-based provider of indexes, which helps international investors track their funds at bourses worldwide.
FTSE, in its semi-annual review, included Habib Bank, Mari Petroleum, Searle Pakistan, Engro Fertilizers, Fauji Cement and Nishat Mills from Pakistan into its Global Equity Index Series Asia Pacific excluding Japan.
“The changes will be effective after the close of business on Friday, March 17, 2017 (i e on Monday, March 20, 2017),” FTSE Russell reported on its official website.
The PSX witnessed a bull ride on Thursday, as its benchmark KSE 100-Index surged 1.44%, or 703.92 points, and closed at 49,696.08 points.
Invest and Finance Securities said in a note, “we do highlight the news item as a major sentiment booster, which should aid the market to continue ascending northward.”
The development is believed to trace additional foreign funds into the PSX.
“Since approximately $67.25 billion funds track FTSE Global Equity Index Series, based on the assigned weightages we estimate a total of $56.8 million to enter Pakistan,” the brokerage firm said.
“This [estimated] flow is in addition to the expected $771 million inflow (passive: $374 million and active: $396 million), which we estimated post-MSCI inclusion,” it added.
Earlier, MSCI – another world leading indices provider – announced in June 2016 to upgrade Pakistan into the MSCI Emerging Markets Index in May 2017.
The FTSE website added the FTSE World Asia-Pacific excluding Japan Index is one of a range of indexes designed to help investors to benchmark their Asia-Pacific investments. The index comprises large- and mid-cap stocks providing coverage of the developed and advanced emerging markets in Asia-Pacific excluding Japan.
“The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalisation,” it said. The FTSE Global Equity Index Series covers around 7,400 securities in 47 different countries-covering every equity and sector relevant to international investors’ needs.
Indexes within the FTSE Global Equity Index Series are designed for the creation of a broad range of financial products, such as index tracking funds, derivatives and exchange traded funds, as well as being performance benchmarks.
"Besides, valuations of Pakistan's stock market being at a 50% discount to major emerging markets such as India, Indonesia and Malaysia, it offers a favourable risk-reward ratio," said Martinsson of Tundra Fonder. On its inclusion, Pakistan will command a weight of around 0.2% in the MSCI EM index. This could lead to $250-275 million flowing into Pakistan's equity market. The FTSE's inclusion of six Pakistani stocks will translate into an inflow of $56 million. These flows are badly needed follo ..
What's also exciting investors is a surge in auto sales, offtake in cement, rise in property prices, benign inflation and lower interest rates. "Last 30 years Pakistan has suffered due to violence and terrorism that cost its economy $20 billion," said Amin Hashwani, former president of the Pakistan-India CEOs Business Forum. "Today, a comparatively better security environment, heavy investment related to CPEC, increased domestic investment and enhanced overseas remittances have triggered growth. ..
Read more at:
http://economictimes.indiatimes.com/articleshow/57564648.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
#Pakistan ETF (NYSE: PAK) In Focus As Country Regains #MSCI #EM Status
https://etfdailynews.com/2017/05/30/pakistan-etf-pak-in-focus-as-country-regains-em-status/
The re-entry into the emerging market block after nine years was made possible by the country’s improving liquidity and growth. Pakistan lost this position in late 2008, following a period of market turmoil that halted trading for months in the Karachi exchange.
Pakistan is the first country to get the frontier-to-emerging promotion after Qatar and the United Arab Emirates several years ago. MSCI will add Pakistan to the Emerging Market Index effective May 31, at the market close, with a weight of just 0.2% (read: Can Emerging Market ETFs Retain Their Mojo in 2017?).
The reclassification is making investors bullish about Global X MSCI Pakistan ETF (PAK – Free Report) – the ETF targeting Pakistani equity markets. The fund will likely lure a wider class of investors thereby injecting huge amounts of money into the country. In fact, the fund is on track for the biggest monthly inflow since its inception two years ago. The ETF has gathered $11.8 million in capital so far this month, propelling its asset base to $48.5 million. According to Bloomberg, the bearish bets have also fallen to the lowest level since December. Over $1 million short positions have been cut over the past six weeks.
PAK in Focus
The product offers exposure to 43 Pakistani equities by tracking the MSCI All Pakistan Select 25/50 Index. The top two firms – Habib Bank and Lucky Cement – dominate the fund returns with a double-digit exposure each. Other firms hold less than 7.2% of the assets. From a sector look, financials and materials occupy the top two positions at 33% and 28%, respectively, followed by energy (18%).
The ETF is expensive relative to many emerging market funds, charging 91 bps in fees and expenses. Additionally, it trades in small volumes of about 35,000 shares resulting in additional cost in the form of wide bid/ask spread.
PAK has been outperforming the broad emerging funds, returning investors 33.5% over the past one-year period compared with gains of 29% for (EEM – Free Report) . It has a Zacks ETF Rank of 3 or ‘Hold rating with a Medium risk outlook, suggesting more room for upside (read: Pakistan ETF Hits New 52-Week High).
The outperformance is likely to continue given the country’s GDP growth, falling poverty, and bourgeoning middle class. After falling to below 4% growth in 2008, Pakistan GDP growth hit a 10-year high of 5.28% for fiscal year 2016–17. However, terrorist attacks, bombings, other incidents of violence and brutal state retaliation continue to weigh on the country’s growth and the ETF performance.
The Global X MSCI Pakistan ETF (NYSE:PAK) was unchanged in premarket trading Tuesday. Year-to-date, PAK has gained 7.49%, versus a 8.13% rise in the benchmark S&P 500 index during the same period.
PAK currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #39 of 77 ETFs in the Emerging Markets Equities ETFs category.
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