Haq's Musings

Riaz Haq writes this data-driven blog to provide information, express his opinions and make comments on many topics. Subjects include personal activities, education, South Asia, South Asian community, regional and international affairs and US politics to financial markets. For investors interested in South Asia, Riaz has another blog called South Asia Investor at http://www.southasiainvestor.com and a YouTube video channel https://www.youtube.com/channel/UCkrIDyFbC9N9evXYb9cA_gQ

Showing posts with label Stock Market. Show all posts

Monday, November 24, 2025

Retail Investor Growth Driving Pakistan's Bull Market

Pakistan's benchmark index KSE-100 has soared nearly 40% so far in 2025, becoming Asia's best performing market, thanks largely to phenomenal growth of retail investors. About 36,000 new trading accounts in the South Asian country were opened in the September quarter, compared to 23,600 new registrations just three months ago, according to Topline Securities, a brokerage house in Pakistan. Broad and deep participation in capital markets is essential for economic growth and wealth distribution in any country.

Pakistan's KSE-100 Index Chart. Source: Bloomberg

Increase in trading accounts is helping inflows into local equity mutual funds as well. As much as 16% of total assets managed by asset management companies is now invested in stocks at the end of September, up from 9% at the start of the year, according to data from the Mutual Funds Association of Pakistan, as recently reported by Bloomberg.

Pakistan Investment Accounts Growth. Source: Bloomberg

Massive growth in retail investors is being enabled by increasing digital penetration in Pakistan. The country now boasts 152 million broadband subscribers, bringing the digital penetration to 61.1% as of October 2025, according to the Pakistan Telecommunications Authority (PTA). Pakistan ranks among the world's top 10 nations in terms of Internet and smartphone users. Most of the brokerage houses now offer online trading accounts and mobile apps for retail investors.

Pakistan Telecommunications Indicators. Source: PTA

KSE-100 companies profitability has grown over 13% in 2025. Stocks in the KSE-100 index have an average dividend yield of approximately 5.81% to 5.9%, with a historical average closer to 6.11%. The current yield is considered attractive, especially when compared to its 15-year average price-to-earnings (P/E) ratio of 8.59x, which is a significant discount to other emerging markets which are currently trading at a P/E ratio of 15.86x.

Sharp Drop in Pakistan's Debt Default Risk. Source: Bloomberg

Pakistan’s debt default risk has seen a sharp drop as the country’s economy has stabilized under an IMF program. The nation's GDP for the April-June period grew at 5.66%, higher than the 3.1% expansion predicted by economists in a Bloomberg survey. The large scale manufacturing (LSM) sector saw 4.08% growth in the first quarter of the current fiscal year.

Pakistan is experiencing rapid growth in Fintech (financial technology) applications. The country's journey to build a digital public infrastructure (DPI) began in March 2000 with the establishment of NADRA, the National Database and Registration Authority. The Gates Foundation defines DPI as follows: "DPI is a digital network that enables countries to safely and efficiently deliver economic opportunities and social services to all residents. DPI can be compared to roads, which form a physical network that connects people and provides access to a huge range of goods and services...... strong DPI has three foundational systems—identity, payments, and data exchange—that together can make life easier in important ways".

Thursday, July 4, 2024

Pakistani Stock Market is the World's Best Performing Market in 2024

Pakistan's KSE-100 shares index topped 80,000 points on Wednesday as stocks climbed more than 600 points, making it the world's best performing stock market. The benchmark KSE-100 index has posted an annual return of 89% during FY24 (July 2023-June 2024) in PKR terms while in US dollar terms, the return was 94%, as the Pakistani rupee appreciated against the US dollar, according to Pakistani media reports. This outstanding market performance is generally being seen as a consequence of a series of unpopular decisions by the military-backed government of Prime Minister Shahbaz Sharif to carry out economic reforms to win the IMF support.

Pakistani Stock Market Outperforms Asian Peers. Source: Bloomberg

Specifically, some analysts attribute the record increase in Pakistani share prices to multiple factors, ranging from the government's investor-friendly budget to the expectation of closing a longer term IMF deal. Others believe the relatively low price-earnings (P/E) multiples of Pakistani stocks make them attractive to investors.

Awais Ashraf, director of research at AKD securities, attributed the stocks upward momentum to “expected entry into the larger IMF program and expected monetary easing boosting investor confidence in equities”, according to Dawn newspaper.

“The majority increase in return is attributed to re-rating of Price to Earning (PE) from 2.2-2.4x in June 30, 2023 to 3.94x in Jun 28, 2024,” said a Pakistani investment firm Topline Securities in its report. It attributed the PE multiple re-rating to “improving economic indicators, i.e. increase in exports and remittances by 11% and 9%, respectively in 11MFY24, decline in inflation from peak of 38.0% in May-23 to 11.8% in May 2024.”

Foreign portfolio investors are coming back to Pakistan’s debt and equity markets after a prolonged absence, marking a significant shift in market sentiment, according to a report in The Express Tribune newspaper. The short-term external investment has surged by a remarkable 84%, catapulting to a 30-month high, now standing at Rs 501.30 billion (US$ 1.8 billion) .

There is a distinct difference in how the new budget, compliant with the IMF requirements, has been received by the ordinary public compared to the investor class. Higher taxes on consumption in the new budget have angered most consumers but the prospects of lower fiscal deficits and significant macro-economic improvements are generally being welcomed by investors. The government, backed by the Pakistani military, sees the need to improve the macro-economic indicators as essential to improving the long-term health of the national economy.

Sunday, November 18, 2012

Pakistan's GDP Grossly Underestimated, Stocks Highly Undervalued

Even with the run-up (in KSE-100), Andrew Brudenell, manager of the HSBC Frontier Markets fund (HSFAX) in London, says Pakistan is one of the cheapest markets he follows, at about seven times earnings. He notes that earnings growth has kept pace with the market. The firms, he adds, are typically cash-rich, boast strong return on equity levels in the 20% range, and pay good dividends. In Pakistan, the informal, cash-based economy for goods and services is larger than the formal economy. Barron's, November 17, 2012

Growing gap between dismal official economic statistics and consumption boom coupled with strong corporate profits in Pakistan is a challenge for many analysts around the world. Most believe that Pakistan's GDP is, in fact, much larger and growing faster than the government data indicates.

Informal Economy Estimates:

M. Ali Kemal and Ahmed Waqar Qasim, economists at Pakistan Institute of Development Economics (PIDE), have published their research on estimates of the size of Pakistan's informal or underground economy.

Kemal and Qasim explore several published different approaches for sizing Pakistan's underground economy and settle on a combination of PSLM (Pakistan Social and Living Standards Measurement) consumption data and mis-invoicing of exports and imports to conclude that the country's "informal economy was 91% of the formal economy in 2007-08". Here are the figures offered by the authors for 2007-8:

1) Formal Economy: Rs. 10,242 billion= $170 billion (using Rs.60 to a US dollar)
2) Informal Economy: Rs. 9,365 billion = $156 billion
3) Total Economy (Sum of 1 & 2): Rs. 19,608 billion = $326 billion

Assuming that the ratio of formal and informal economy remained the same in 2011-12, here are the figures for Pakistan's total economy as of the end of last fiscal year which ended in June, 2012 :

1) Formal Economy: $210 billion
2) Informal Economy: $191 billion
3) Total Economy: $401 billion

Hypermart Lahore

Naween Mangi of Businessweek in her piece titled "The Secret Strength of Pakistan's Economy" described how Pakistan's informal cash-based economy evades government's radar, illustrating it with the story of a tire repair shop owner Muhammad Nasir. Nasir steals water and electricity from utility companies, receives cash from his customers in return for his services and issues no receipts, pays cash for his cable TV connection, and pays off corrupt police and utility officials and local politicians instead of paying utility bills and taxes.

Karachi Stock Market:

Comparing Karachi and Mumbai Share Indexes

A string of strong earnings announcements by Karachi Stock Exchange listed companies and the Central Bank's 1.5% rate cut have helped the KSE-100 index exceed 16,000 level, a gain of 42.1% (33.2% in US dollar terms) year to date. In spite of this run-up in KSE-100, Andrew Brudenell, manager of the HSBC Frontier Markets fund (HSFAX) in London, remains bullish on Pakistani equities, according to Barron's. Pakistan is one of the cheapest markets he follows, at about seven times earnings. He notes that earnings growth has kept pace with the market. The firms, he adds, are typically cash-rich, boast strong return on equity levels in the 20% range, and pay good dividends.

Conclusion:

While Pakistan's public finances remain shaky, it appears that the country's economy is in fact healthier than what the official figures show. It also seems that the national debt is much less of a problem given the debt-to-GDP ratio of just 30% when informal economy is fully comprehended. Even a small but serious effort to collect more taxes can make a big dent in budget deficits. My hope is that increasing share of the informal economy will become documented with the rising use of technology. Bringing a small slice of it in the tax net will make a significant positive difference for public finances in the coming years.

Related Links:

Haq's Musings

Investment Analysts Bullish on Pakistan

Precise Estimates of Pakistan's Informal Economy

Pak Consumer Boom Fuels Underground Economy

Rural Consumption Boom in Pakistan

Pakistan's Tax Evasion Fosters Aid Dependence

Poll Finds Pakistanis Happier Than Neighbors

Pakistan's Rural Economy Booming

Pakistan Car Sales Up 61%

Resilient Pakistan Defies Doomsayers

Land For Landless Women in Pakistan

Pakistan's Circular Debt and Load-shedding

Hypermart Pakistan

Monday, May 18, 2009

Mumbai Stocks Fueled by Post-Election Optimism

In a resounding vote of confidence for Prime Minister Manmohan Singh's continuing leadership, Indian and international investors are celebrating with 17% jump in the 30-share BSE index, or 2,110.79 points, to 14,284.21 points, for its highest close since Sept. 11. Trade was finally halted for Monday before noon.

Here are the key headlines from Reuters about strong and positive investor reaction in Mumbai:

* Stocks jump 17 pct, biggest rise in 17 years

* Circuit breakers halt trade twice; markets closed early

* Rupee up 9 percent from low in early March

* Morgan Stanley raises stock, growth projections

* Bond yields drop, stake sales seen to fund deficit

Next door in Pakistan, the investor reaction to news of the day was muted and the KSE-100 remained essentially flat. Karachi Stock Exchange (KSE) was up in the morning but then the sellers came in on Monday and the benchmark KSE-100 Index closed 5 points down to 7,172.

Amidst major counterinsurgency operations in and around Swat Valley and growing refugee crisis, there are signs of optimism by investors and bond holders in Pakistan's economy. The KSE-100, Karachi's stock index, is up 27 percent this year, compared with a 12 percent gain in MSCI’s emerging-market stock index of 26 emerging economies, including Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, Turkey and Venezuela. The Pakistani rupee, which declined 22 percent against the dollar last year, the second-worst performer in Asia, fell 1.8 percent this year.

Currently, KSE-100 companies are trading at a forward price-earnings multiple of about 5 versus Mumbai Sensex PE ratio of over 10. So a lot of the worst case pessimism is already reflected in the share prices of some of the high-quality blue-chip companies trading at Karachi stock exchange. Could it get worse? It's possible but not likely. There appears to be a lot more upside than downside at this time. Between 2001 and 2007, as Western governments fretted about Pakistan's nuclear weapons falling into the hands of militants, the KSE-100 rose risen more than 10-fold. It is capable of repeating the same performance from the lows of this year.

According to Pakistaniat website, Pakistan’s trade deficit narrowed by almost 50% in March, as imports declined faster than exports. In the same month, worker remittances were a record high at US$743 million an increase of 23% over last year. While Japan’s exports plummeted by 50%, China’s by 26% and India’s by 33%, Pakistan’s exports were down by 25%. Even though, the competitive peer group is formidable, Pakistan is the best performer.

On the corporate profitability front, during the worst global down turn in a century, Pakistan’s corporate profitability of listed companies declined by a mere 3% in aggregate in the 3rd quarter of 2009.

At the end of calender year 2008, remittances topped 7 billion dollars, an increase of 17 per cent year over year, led by higher remittances from oil-rich GCC countries, which grew by 30 per cent year on year. Similarly, FDI inflows jumped 100 per cent year on year to 708 million dollars in December, 2008, as the telecom, oil and gas, and financial-services sectors continued to attract foreign inventors, according a report in the Nation newspaper.

Pakistani military's robust response to the rising militancy appears to be backed by a significant majority of the people. If the Pakistani political leadership can deal with its fall-out, such as the humanitarian crisis, and sustain the popular support for the ongoing military action, and the government executes a rational set of economic policies, it is quite reasonable to expect an economic rebound within a year.

Given strong underlying growth dynamics in South Asia, the negative feedback effects of the global financial crisis should be temporary as well. A relatively rapid rebound can be expected in 2010, with a projected revival of GDP growth to 7 per cent, spurring job growth again.

Related Links:

Can Congress Deliver in India?

Is Pakistani Economy Poised For Rebound?

Is Indian Democracy Overrated?

Mumbai's Slumdog Millionaire

Can India Do a Lebanon in Pakistan?

Poor Sanitation in India

Stable, Peaceful, Prosperous India

No Toilet, No Seat in India

Poverty Tours in India, Brazil and South Africa

South Asia's War on Hunger Takes Back Seat

Grinding Poverty in Resurgent India

Pakistani Children's Plight

Poverty in Pakistan