Abamco's Ali Uses Cricket Strategy to Outperform Pakistan Index
July 13 (Bloomberg) -- Najam Ali, who oversees $380 million in Pakistani stocks and bonds at Abamco Ltd. and has brought investors double the return of the benchmark stock index, likens his investment strategy to cricket, his favorite sport.

``A really good game is not a one-day match but a five-day test match,'' said Ali, 46. He manages the biggest private-sector fund in the south Asian nation. ``You have to be patient and you have to pick your moments.''

You also need to be prepared to lose at times. Pakistan's stock market is the region's most erratic. In the last 12 months, it had the biggest price swings in Asia and was twice as volatile as the Morgan Stanley Capital International Emerging Markets Index. Ali himself says he should have sold more starting in April amid a rout in shares of developing countries.

Still, his buy-and-hold strategy has paid off. His stake in Pakistan International Container Terminal Ltd., operator of a container shipping facility in Karachi, almost quadrupled in the 12 months ended June 30. Shares of Adamjee Insurance Co., a general insurance company, more than doubled in the period.

The 3.45 billion-rupee ($57 million) Unit Trust of Pakistan Aggressive Asset Allocation Fund, Ali's biggest open-end fund, returned 73 percent in the period. It outperformed the 34 percent return, including reinvested dividends, of the Karachi Stock Exchange 100 Index.

The Karachi 100 has slumped 20 percent from a record on April 17. The index climbed 54 percent in 2005, making it Asia's best performer after South Korea's Kospi index. It's 2.6 percent higher this year.

Room to Grow

The Karachi index recorded volatility of 32 percent from the average in the year ending June 30 compared with 16 percent for the MSCI Emerging Markets Index, according to data compiled by Bloomberg. Volatility measures stock-price swings.

``The Pakistan market has given us superb returns no matter which way we look at it,'' said Ali, who was an executive director at the Securities & Exchange Commission of Pakistan before he took the helm at Abamco in 2004.

Ali, a chartered accountant who has been following national cricket since he was five years old, runs six open-end and three closed-end funds open to both domestic and overseas investors. His top five holdings as of March 31 were Faysal Bank Ltd., Pakistan International Container Terminal, Pakistan Telecommunications Co., Attock Petroleum Ltd. and Adamjee Insurance.

Stock Sales

There are 47 mutual funds in Pakistan overseeing 168 billion rupees. That's the equivalent of about 6 percent of the 2.6 trillion rupees sitting in the nation's bank deposits, according to the Mutual Funds Association of Pakistan, which Ali also heads.

Less than 0.1 percent of the nation's 160 million people invest in mutual funds. The number of investors rose 19 percent to 182,663 in the 12 months ended March 31 from a year earlier, according to the association.

Prime Minister Shaukat Aziz said in a May 22 interview that the $118 billion economy would expand at an annual pace of as much as 8 percent over the next five years. The economy grew an estimated 6.6 percent last fiscal year and 8.6 percent in the year ended June 30, 2005, the fastest pace in two decades.

The government said last month it planned to sell shares in state-owned companies on global markets to acquaint Pakistan with international investors, finance the deficit and repay $35 billion of overseas debt.

`Not-So-Common Stocks'

``The volatility of Pakistan is on the high side among the emerging-market universe,'' said John Pollen, head of emerging- market stocks at Pioneer Investments Management in Dublin, which manages about $215 billion in assets worldwide. ``Excessive stock sales will have a damping effect on prices.''

In the nine months ended March 31, profit at Pakistan International Container increased 79 percent as exports jumped. Earnings at Karachi-based Adamjee Insurance surged fivefold in the quarter ended March 31, as gross premiums rose 27 percent in 2005.

Shares of Attock Petroleum, which operates gas filling stations in Pakistan and Afghanistan, soared 104 percent in the 12 months ended June 30. Elixir Securities forecast that profit at Islamabad-based Attock more than doubled from a year earlier as sales jumped fourfold.

The fund owes its success to ``the trick of picking some not-so-common stocks,'' said Ali, who earned a degree in economics from the University of Michigan in 1985. ``We like growth stocks best.''

Urdu Poetry

Ali said he regrets not foreseeing the drop in the stock market. Investors dumped shares in developing countries amid concern interest rates would rise around the world, slowing global growth, and higher U.S. borrowing costs would lessen the appeal of riskier assets.

The MSCI Emerging Markets Index, of which Pakistan represents 0.2171 percent, the second-lowest weighting after Jordan, has tumbled 7.3 percent over the past three months.

``We expected just a slight fall so we remained invested,'' said Ali, whose interests outside of cricket include Urdu poetry. ``We were wrong. It would have been better to sell 20 percent of the portfolio and hold cash.''

Ali, who has a television next to his desk to keep up with the latest scores while also watching the markets, said he expanded the number of funds from five to nine in the last two years to meet demand from overseas investors.

``We would like Abamco to access the international capital markets and become a regional player,'' said Azam Khan, investment officer at Washington-based International Finance Corp., the private-sector arm of the World Bank. ``This will give the management an international perspective on asset management, investor relationships and portfolio construction.''

IFC has invested $5 million in Abamco's Composite Fund, one of the largest mutual fund bets in IFC's portfolio.

Oil and Gas

Ali's favorite industries for the year that began July 1 include oil and gas, fertilizer and cement. He declined to name specific companies.

``If I had to pick just one sector, it would have to be oil and gas,'' said Ali, who sits on the board of Pakistan Oilfields Ltd., the nation's third-largest energy explorer. ``Pakistan's future is linked with this sector.''

The Pakistani government forecasts demand for oil products will grow 5 percent annually to reach more than 18 million tons by 2010. The government is encouraging increased exploration of oil and gas to cut the country's oil-import bill, which accounts for about one-fifth of the nation's total imports.

Ali, whose favorite cricket player is Imran Khan, a former Pakistan captain who is now a member of parliament, said the industry's long-term prospects appeal to patient investors like him.

``A lot of fund managers try to time the market and that is very dangerous because if you get it wrong, you have had it,'' he said. ``I say if the market looks good, stay invested. If it doesn't, keep cash up to 20 percent. Buy and hold is the best thing you can do.''

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