What do you guys have to say about this?
http://www.iht.com/cgi-bin/search.cgi?query=SYDNEY&sort=swishrankThe rally that made Pakistan's stock market the best performer in Asia during the past five years was interrupted last quarter. Forecasts of slower profit growth and a cooling economy suggest further setbacks lie ahead.
"Although we expect the economy to remain one of the fastest growing in the region in 2006, earnings growth is moderating," said Spencer White, chief Asian equity strategist for Merrill Lynch in Hong Kong. "We find it difficult to argue for a further rerating from these levels."
The Karachi Stock Exchange 100 index dropped 13 percent between Feb. 23 and March 13 as prices tumbled across nearby Middle Eastern markets. Oil & Gas Development, Pakistan's largest company by market value, lost 18 percent.
Stocks bounced back from the slump last week, with the KSE 100 climbing 3.9 percent to close at a record 11,936.59. Oil & Gas Development and National Bank of Pakistan, the country's largest state-controlled lender, led the turnaround.
Douglas Polunin, a fund manager at Polunin Capital Partners in London, last month sold Karachi Electric Supply following a 42 percent rally this year. Karachi Electric, the nation's biggest nonstate utility, has slumped 20 percent since Feb. 7.
"There are pockets of overvaluation in Pakistan compared to, say, a year ago," Polunin said. "I'm not so keen on many of the banking stocks, which have been among the main drivers of the market." He still owns Nishat Mills, the country's biggest textile manufacturer, and Lucky Cement, whose shares have more than doubled since October.
The KSE 100 climbed almost 800 percent in the past five years, the fourth-largest growth of 77 global benchmarks tracked by Bloomberg. Stocks soared as Pakistan, under the leadership of President Pervez Musharraf, aligned itself with the United States in the war on terror that followed the Sept. 11 attacks in 2001.
In the first quarter, the index gained 20 percent, three times as much as Morgan Stanley Capital International's Asia-Pacific index.
Last month's slide coincided with similar slides in Dubai, Egypt, Jordan, Kuwait and Saudi Arabia, all among the world's best performers since 2003. None of these markets has reached new highs since then, as Pakistan has. Last week, the KSE 100 surpassed a 3.7 percent gain in the MSCI index.
Spending on reconstruction after an earthquake in October and the prospect of lower interest rates should ensure that the KSE 100 hangs onto its gains, White said. The strategist has an "overweight" recommendation on Pakistan, indicating investors ought to own more shares than benchmarks suggest.
Shuja Rizvi, head of equity sales at Capital One Equities in Karachi, forecasts the index will rise to 13,000 this year, a 9 percent gain from last week's close. "The market is not as bullish as in previous years, but we may see a gradual increase," he said.
Earnings growth for companies represented in the KSE 100 will slow to 14 percent this year from 20 percent a year ago, Merrill Lynch said, citing higher borrowing and energy costs.
The index is valued at 12 times estimated earnings for 2006, up from 9.8 times at the end of last year. The ratio amounts to a discount of 19 percent to the rest of the region and 32 percent relative to India, according to the brokerage.
Pakistan's $103 billion economy will probably expand less than the government's earlier forecast of about 7 percent this fiscal year as farm output slowed, Dawn newspaper reported last week, citing an unnamed government official. That's down from the 20-year high of 8.4 percent in 2005. $@
http://www.iht.com/articles/2006/04/09/bloomberg/sxasia.php
http://www.iht.com/cgi-bin/search.cgi?query=SYDNEY&sort=swishrank
