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Karachi index — Asia’s best stocks market, regaining ‘tiger’ status

Published on 31st Oct, Edition 44, 2016

 

Historically, the Pakistan Stock Exchange (KSE-100) reached an all-time high of 41,464 in October of 2016 and a record low of 538.89 in June of 1990. In spite of deteriorating political condition and low levels of foreign investment and slow growth and underdevelopment. Pakistan has succeeded in attracting very positive reviews between January and July 2016 from numerous Western media houses, the World Bank and the globally-acclaimed credit rating agencies like Moody’s, etc.

In July 20, 2016 Pakistan has beaten major Asian economies in stock market performance as the country’s benchmark equity Index, the KSE-100, has been the fifth best performing throughout the world. In 2016, Pakistan’s benchmark equity Index, the KSE-100, has been one of Asia’s best performing. In fact, it is the fifth-best performing stock index globally. Bloomberg even referred to Pakistan as an Asian ‘tiger,’ in a report.”

The eminent media outlet, which is run by 175 staffers pulled from prominent journalism brands like Bloomberg, the New York Times, the Economist and the Wall Street Journal, etc, has added: “The Karachi Stock Exchange (KSE) — also known as the Pakistan Stock Exchange — has stood out in recent years, despite a troubled political and security environment.

At present improving political and financial stability is helping revive Pakistan’s stock markets.
Morgan Stanley Capital International (MSCI) emerging markets index first included Pakistan in 1994.
In 2002, the KSE was shut down due to a stock market crash. Six years later, in 2008, it was temporarily closed following the global financial crisis. In view of this, MSCI dropped Pakistan out of the emerging markets index till this year.

Now both Pakistani and foreign investors have regained confidence in the country’s equity markets. Investment in infrastructure, government spending, is making Pakistani markets attractive to investors.
The Chinese have announced large investments in the country which will boost trade and make critical infrastructure, such as power, easily available to individuals and industries alike.

Moody’s assessment of Pakistan’s “Moderate” economic strength encompasses the sovereign’s very low per capita incomes and the large size of its economy.

Economic output, previously anemic, has picked up over recent years and is now rising at a relatively healthy pace. GDP growth has edged up to average 4.1 per cent year-on-year since fiscal year 2014, from 3.4 per cent between fiscal years 2010-13.

The implementation of the China-Pakistan Economic Corridor (CPEC) will likely support activity further, and in concert with energy sector reforms will improve the operating environment for investment.

July 14, 2016 report of a renowned American media house Bloomberg had termed the Pakistan Stock Exchange (PSX) the best of the Asian markets. The Bloomberg report had contended: “Pakistan has regained the ‘tiger’ status in the region with 15 percent rise and increasing rate of annual growth.”

The report had stated that the Pakistani economy was moving ahead to even stronger points with stable output.

According to the report, inclusion of Pakistan in countries with emerging markets status will increase foreign investment significantly.

 

The American media house had said that transnational investors were considering Pakistan the best market for gains after reduced performance of the Chinese economy and interest rates in the United States.

Prime Minister Nawaz Sharif averted an external payments crisis in 2013 through a loan programme of the IMF and is dedicated to boosting economy to its fastest pace of the decade.

The World Bank President Jim Yong Kim had opined that Pakistan was on the path of increased economic growth and prosperity. He applauded the prudent economic policies of Pakistan government, saying that the country’s economic outlook had become stable which was the result of the efforts of its financial team.

In the fiscal year 2015, we saw improved investor participation at the bourse. Although the market’s average. daily traded volume increased by a mere 1 percent year on year in fiscal year 2015, the average daily traded value increased by an encouraging 27 percent .

Pakistan’s equity market has been consistently beating China and India’s markets over the last 5 years. Even this year, Pakistan’s stock exchange outperformed India and China’s stock exchanges. The difference was almost 2 to when compared to China’s stock exchange performance this year alone.

This is surprising as Pakistan is a country known to be plagued by a large number of terrorist attacks and political instability. Pakistan also lags behind India and China in GDP growth rates and unemployment for example.

China and India are comparatively much stable markets. A key reason for higher stocks is due to foreign investments that Pakistan is receiving from a few sources.

China’s markets did not receive any foreign capital due to the return of strict government policies, resulting in decreased investor confidence in the country. Slow progresses with reforms in India have also hurt their growth rate.

Pakistan recently went from Frontier market status to Emerging market status. This is determined to attract even more foreign investment of more than $500 million in value.

A reason why terrorist attacks did not affect stock exchange performance is that they don’t directly affect them unless they are disruptive to trade.

Pakistan used to be a frontier market during the last 5 years and was therefore favored by the numbers game.

A number of domestic acquisitions from foreign suitors like the acquisition of Karachi’s K-Karachi by Shanghai Electric Power Co were also supportive of market reform efforts by Pakistan. These factors have helped Pakistan attract foreign exchange and attention as well.

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