Despite Political Turmoil, Stock Analysts Say Pakistan Has Its Attraction
By Heda Bayron
Hong Kong
21 January 2008



Assassination, riots and bombings hardly make Pakistan an investor's dream. But as VOA's Heda Bayron reports from our Asia News Center in Hong Kong, some stock analysts say Pakistan offers opportunities as well as risk.


A Pakistani stock broker stands before a panel at Karachi Stock Exchange, KSE, in Karachi, Pakistan (file photo)
At a time when Western magazine covers call Pakistan the world's most dangerous country, Mark Matthews, Asia stock strategist at the U.S. investment bank Merrill Lynch in Hong Kong, is upbeat about Pakistan. He says Pakistan is his number two favorite market, after Hong Kong.

"When you watch television or pick up a newspaper everything is blood and gore," Matthews said. "When you go to the country and you do your homework, you see that it's a fantastic economy, growing 6.5 to seven percent."

Merrill Lynch said in a recent report that Pakistan is unique, with one of the highest economic growth rates in Asia, cheap stocks and a stock market largely insulated from Wall Street's troubles, which have dragged down Asia's major indexes.

That positive forecast came even after Pakistan's central bank reduced its forecast for economic growth to seven percent or less, from an earlier prediction of 7.2 percent. That move followed the assassination of former Prime Minister Benazir Bhutto and an exodus of foreign stock investors because of months of political protests and militant violence.

The State Bank of Pakistan says portfolio investments - which include stock investments - fell more than 90 percent between July to November last year compared with the same period the previous year.

Matthews says the political factor in Pakistan is "overstated". He says even if another high-ranking political figure is killed, it will not spoil Pakistan's economic growth, which is fueled largely by consumption.

"Basically 99 percent of Pakistanis … aspire for the same things that everybody else does, a mobile phone, a television, a motorcycle," Matthews said. "The one percent or much less who are not like that, well, they will be thorn on the side of the country for some time but it's certainly not enough to derail the strong economic growth or, for that matter, the strong stock market."

Most of Pakistan's 160 million people are poor. But in recent years economists say government reforms have helped pump life into an economy that, in 1999, faced sanctions over the military's nuclear weapons test. Foreign direct investment rose to nearly $4 billion in 2006, from less than a billion in 2003 - helping create new jobs.

The Karachi Stock Exchange rose around 50 percent last year, well above Hong Kong's Hang Seng index's 39 percent increase. Local investors drove stock market growth.

Tariq Choudhry, head of equity sales, at Invisor Securities in Karachi, says it is a tough job convincing foreign investors to put money into the market. But he says one draw is that Pakistan shares are still cheaper than similar stocks in the region.

"With volatility comes price discovery," Choudhry said. "We have seen tremendous growth in the banking sector, we have seen Standard Chartered acquire a local bank, we see Barclays recently acquire a license, we have seen Temasek Holdings of Singapore acquire a local bank."

Stock analysts say investing in Pakistan has its upside, if investors can bear the risks. Aside from the political uncertainty, Pakistan faces creeping inflation and a widening government deficit. Elections are scheduled for next month, and with a new government could come economic policy changes too.



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http://www.voanews.com/english/2008-01-21-voa9.cfm

Quoted for emphsis ... that people just to meet their needs ... and the current setup has actually given them the power to dream and actually a hope to achieve those dreams.

Most pakistanis can't be bother with politics/extreamism etc.

Also quoted for emphasis.
1. He says its his 2nd! favorite market after Hong Kong, thats saying a lot (coming from him).
2. He isn't an idiot as the second paragraph shows, hes actually done research into Pakistan rather then just listening to the news.
3. We are 'insulated', as he says, from Wall Street's troubles, which is an extremely good thing in the long run.

With regards to the 3rd point we are insulated for a very good reason that the AKD securities guy mentioned today and its a damn good reason which is

US is all set to get hit by an economic recession.

and here is the better part

1 - Only 5% of pakistan's GDP is geared towards exports to US
2 - 17% of india's GDP is geared towards exports to US
3 - 30% of China's GDP is geared towards exports to US

So now .... if the Potential FDI canidiates are not going for China (i am guessing Hong Kong is also in the same line) ... why won't they go towards the '2nd best' growing economy ?


I think if our politicians can avoid douche bagry, we might actually be able to get somewhere and the poor may be start getting better results (not poorest of the poors, we are still a decade or two behind getting those guys any meaningful results).

I'm tired and sleepy...30% of Pakistan's exports go to the U.S., and it only accounts for 5% of our GDP?

According to this article, http://www.thenews.com.pk/daily_detail.asp?id=92156

The Saudis only account for 1.8% of our exports, and the Chinese only invested $7.3mn USD into our economy?

Although we are fairly insulated from Wallstreet...we will still bear some harsh economic downfalls under a U.S. recession. However some solid policy making and actual hard work, we can rapidly diversify our trade to as many different sources as possible. To this our feudal class really need to start jumping the industrial cart and start looking to build up infrastructure, agricultural, manufacturing, resource extraction, etc, firms and start to aggressively compete for African, Gulf Arab and Central Asian countracts. Plus we should stop allying ourselves with a singular force and adopt a non-aligned, neutral & exclusively pro-Pakistan agenda...and exploit as many markets for our own good, regardless of who they are.

You have some seriously skewed numbers there. Chinese investment only $7.3 million? 30% of our exports to US?!

Here is our export statistics:

http://www.statpak.gov.pk/depts/fbs/statis..._trade/14.6.pdf

As it shows our export was about 29% toward the US in 2006, but last year it dropped down to 24% or so.

I only said what the CEO of AKD said on Geo News. I am going wiht an assumption that he knows what he is talking about, afterall he is amongst the top players at KSE and he appeared pretty upbeat.

As Salam o Alikum

I Onced WOrked with Saindak Copper Gold Project and Now i work in Customs.

I noted somethings which i want to share.

Majority of Pakistan Exports are Either destined to Saudiarabia,Iran,UAE, CHINA and Major Imports from Malaysia,Kenya,USA.

I can post official figures if you want. But let me be clear that in case of sanctions NOW only Imports will be Hit and Not Exports.

I'm not sure you have the figures correct. we have a trade surplus with the US (we sell them more, than they sell us) , have done for many years.

what causes us trouble is the huge oil import bill. We are in defecit with the oil rich economies (we import more than we sell them).

Actually, I think exports will be hurt more (to the US specifically), not imports.