Saturday, September 17, 2016

"Why Pakistan's Market Beats China's And India's"

I last referred to a very successful Pakistani businessman I know in a post that somehow ran off the rails before it even started, what with the Battle of the Pecs scene from "I" (once seen, it can't be unseen).
He is such a booster, he could have written this piece.

HT up front: Alpha Ideas' Weekend Mega Linkfest.

From Forbes:
Pakistan’s equity market has been outperforming China’s and India’s markets by a big margin in recent years. In the last twelve months, Global X MSCI MSCI +% Pakistan ETF was up 20%, beating India’s and China’s comparable ETF’s by almost two to one – see table.
Index/Fund 12-month Performance 5-year Performance
Global X MSCI Pakistan (NYSE:PAK) 20% 400%*
IShares China (NYSE:FXI) 9.80% 16.00%
iShares S&P India 50 (NASDAQ:INDY) 12.77% 33.0%
iShares MSCI Emerging Markets  (NYSE:EEM) 5.38% 1.52%
*In local currency.
Source: Yahoo. Finance and Karachi Exchange 9/5/2016

Pakistan’s, India’s and China’s Key Metrics
Country China India Pakistan
GDP $10866 billion 2074 billion $270 billion
GDP Growth yoy 6.7% 7.1% 4.24%
Unemployment 4.05% 4.9% 5.9%
Inflation Rate 1.3% 5.05% 3.56%
Capital flows -594 HML -$300 million -$1882 million
Government Debt to GDP 43.9% 67.2% 64.8%

That may come as a big surprise to some. Pakistan has been suffering all sorts of terrorist attacks, which makes it a very unstable country to put your money in. And it has been lagging behind both India and China in key macroeconomic metrics like GDP growth rates and unemployment—see table.

What does the collective wisdom of markets see in Pakistan’s markets that others are missing? 
A few things. First, terrorist attacks don’t usually affect financial markets, unless they are disruptive to trade, which hasn’t been the case in Pakistan.  Second, Pakistan is a frontier rather than an emerging market, and therefore, favored by the numbers game. Third, its market reform efforts have been getting a couple of votes of confidence from overseas like $1 billion in support from the World Bank – and a couple of domestic acquisitions from foreign suitors like the acquisition of Karachi’s K-Karachi by Shanghai Electric Power Co. This has all been music to the ears of foreign investors....MORE
Just so you know, the Karachi Stock Exchange is interesting to say the least. A few of our posts:

Karachi Stock Exchange: KSE’s black Monday — heaviest ever single-day decline
The rumours of change at the head of the government spread like wildfire and nervous investors started to throw away shares at ridiculously low prices. When the dust settled at the end of trading day, a cool sum of Rs186 billion ($3.2 billion) had been washed away from the market capitalisation....So, should the KSE Board or the frontline regulator -- the KSE management -- have moved in to calm the investors’ fears. “We cannot be expected to comment on rumours,” says Shaukat Tarin, the chairman of the Board of Directors of KSE, adding: “If we were to do that, we would be doing just that and nothing else”....MORE 
Pakistani Investors Stone Karachi Exchange as Stocks Plunge...

Karachi: Trade in shares on Pakistan's main stock exchange ground to a halt on Tuesday as investors lost all interest... 
...The Karachi Stock Exchange benchmark 100-share index ended unchanged from Monday at 9,183.14, 39 points above a floor that was imposed on August 28 after sharp losses. No shares listed on the KSE index were traded for the first time ever...