India to Borrow and Spend More in 2010-2011

[In God We Trust]

We also beat this one to death on the other thread. Now that you are resurrecting it, let me tell you that market caps are judged relative to the national GDP.

KSE is only a small fraction of Pakistan's GDP, whereas BSE is about the size of India's GDP. Now, is that good thing?

I don't think so. With BSE's high market cap near India's GDP, and average PE ratio of 2X that of KSE, it just means that KSE has much more upside than BSE. I think BSE is a big bubble right now. KSE is the place to be, as far as my money goes.

Haq's Musings: Goldman, Franklin-Templeton Bullish on Pakistan's Economy

Ambani brothers of india can own 100 % all companies Pakistan's Karachi Stock Exchange and still be left with $30 billion to spare.

 

[karan.1970]

The data on economic and market comparison has been beaten to death in the other thread. Apparently you are new to this discussion.

The bottom line is that KSE performance has far exceeded the BSE performance over the last decade 1999-2009.

Pakistan's KSE-100 stock index surged 55% in 2009 in US dollar terms and 65% in rupee terms, in a year that also saw the South Asian nation wracked by increased violence and its state institutions described by various media talking heads as being on the verge of collapse. Even more surprising is the whopping 825% increase in KSE-100 from 1999 to 2009, which makes it a significantly better performer than the BRIC nations. BRIC darling China has actually underperformed its peers, rising only 150 percent compared with energy-rich Brazil (520 percent) and Russia (326 percent) or well-regulated India (274 percent), which some investors see as a safer and more diverse bet compared with the Chinese equity market, which is dominated by bank stocks. This is the kind of performance that has got the attention of some of the top investors and investment firms around the world.

KSE-100 closed at 1408 on Dec 31, 1999. Then, exactly 10 years later on Dec 31, 2009, it closed at 9386. In between, it hit a peak of 15125 on March 31, 2008 around the time of the elections.

Using a 10-year window with year-end closes in 1999 and 2009, it comes to about 21% CAGR. If you discount it for Pak currency decline from 55 to 85 rupees to a dollar (most of which occurred since 2008), then the CAGR return is still a whopping 16% a year....clearly beating all of the BRIC nations' stock performance in this period.

If you insist on making KSE-100 look bad by using the March 31, 2000 peak (2000 points) at last week's close (on 10138 points), then 17.82% before currency discount, and 13% after it...still beating all of the BRICs.

As to India's per capita in PPP terms, it's highly questionable because it uses a misleading PPP methodology based on Big Mac index.

In US dollar terms, the per capita incomes of India and Pakistan are about same at $1000 a year.

Talking about regional insurgencies, India has many more of them than Pakistan does.

Unlike you and other chauvinistic Indian posters here, I have personally had the opportunity to visit and compare India and Pakistan first hand over the last several years.

Haq.. Dude.. You repeated your post from 2 pages back on this thread only... Allow me to repeat my response

Riaz.. Yes.. I have picked the month High value for all the time periods to calculate the trailing returns for 2, 3, 5 and 10 years.. What's your point and how is this picking dates to prove a point. I have used the same variable i.e. Month's highest point for all calculations for ^KSE and ^BSESN. It would have been misleading if I had used one number for Karachi and another for Bombay stock exchange.. You can re do the calculations with another variable like highest day close or lowest day close .. The answers will not be significantly different..

If you go theu my past posts, I have not argued that KSE has not done a good job. Only that the high domestic returns become less pronounced when you factor in the currency fluctuation...The dollar adjusted returns are somewhat in line with the some of the BRIC countries .. However the risks in Pakistani economy makes it a not so good proposition for foreign investors. Thats why despite the noises by Templeton etc, the Foreign investment in Pakistani capital markets has actually gone down in last year over the same period year before...


btw using the month close figures(instead of peaks) and using March 2010 as present, gives you the following numbers for dollar adjusted trailing CAGR


......1 yr 2 yr 3 yr 5 yr 10 yr

KSE: 40%, -30%, -14%, -1.6%, 13.6%

BSE: 98%, -1.6%, 8.42%, 20.4%,12.66%

Also the PPP figure you are ridiculing is also used by worldbank. Just because a metric shows Pakistan in a worse light, it doesnt become questionable. While i agree its an approximation, you cant just ignore an indicator used by all world bodies..Any way, even the nominal GDP per capita, India is better of by over 10%

 

[RiazHaq]

If Investment banks and mutual funds are bullish on KSE, Why there is no single ETF or mutual fund pakistan specific. I watch CNBC daily. I have not heard a single word on pakistan unless topic is terror or bomb blast.

Yesterday there was blast in Russia so oil price increased. There are bomb blasts everyday in pakistan. No one cares.

Investment community don't care about pakistan. You have to shed your ego and accept the fact .

The KSE performance has been better than BSE, and the rest of the BRICs, in spite of the bomb blasts and other problems. Pakistan has, and continues to defy, all the doomsayers for years.

Now can you imagine how much better it will be once some measure of security ad stability returns?

I guess not, it seem the only thing you imagine is the total destruction of Pakistan. But, let me assure you, it'll remain a pipe dream for people like you whose toxic ill-will toward Pakistan is obvious from the posts here.

 

[Mahakaya]

The data on economic and market comparison has been beaten to death in the other thread. Apparently you are new to this discussion.

The bottom line is that KSE performance has far exceeded the BSE performance over the last decade 1999-2009.

Pakistan's KSE-100 stock index surged 55% in 2009 in US dollar terms and 65% in rupee terms, in a year that also saw the South Asian nation wracked by increased violence and its state institutions described by various media talking heads as being on the verge of collapse. Even more surprising is the whopping 825% increase in KSE-100 from 1999 to 2009, which makes it a significantly better performer than the BRIC nations. BRIC darling China has actually underperformed its peers, rising only 150 percent compared with energy-rich Brazil (520 percent) and Russia (326 percent) or well-regulated India (274 percent), which some investors see as a safer and more diverse bet compared with the Chinese equity market, which is dominated by bank stocks. This is the kind of performance that has got the attention of some of the top investors and investment firms around the world.

KSE-100 closed at 1408 on Dec 31, 1999. Then, exactly 10 years later on Dec 31, 2009, it closed at 9386. In between, it hit a peak of 15125 on March 31, 2008 around the time of the elections.

Using a 10-year window with year-end closes in 1999 and 2009, it comes to about 21% CAGR. If you discount it for Pak currency decline from 55 to 85 rupees to a dollar (most of which occurred since 2008), then the CAGR return is still a whopping 16% a year....clearly beating all of the BRIC nations' stock performance in this period.

If you insist on making KSE-100 look bad by using the March 31, 2000 peak (2000 points) at last week's close (on 10138 points), then 17.82% before currency discount, and 13% after it...still beating all of the BRICs.

As to India's per capita in PPP terms, it's highly questionable because it uses a misleading PPP methodology based on Big Mac index.

In US dollar terms, the per capita incomes of India and Pakistan are about same at $1000 a year.

Talking about regional insurgencies, India has many more of them than Pakistan does.

Unlike you and other chauvinistic Indian posters here, I have personally had the opportunity to visit and compare India and Pakistan first hand over the last several years.

Another one of your incomplete stats - An index rising by 825% does not by itself make the index outperform another. Please learn about basics of investing:

1. You need to get the standard deviation of the returns - which will differ based on your frequency i.e. weekly, monthly, yearly

2. You then calculate the sharpe ratio i.e. returns per unit of variation. i.e. the reward to risk ratio. You forgot to take that into account

3. If really Pakistan delivered 825% absolute returns then why is that the world community does not talk about it as a major investment destination. Whether you adjust for the exchange rates or not in absolute terms it will not make a difference cos it will be reflected in the interest rates which also as a matter of fact influence the markets.

4. Can you please let me know how does Pakistan calculate it PPP rate - as far as I know CIA uses the Big Mac index for all the currencies - so it is a fair comparison. Another point with Indian population 6 times your population the comparison is even more noteworthy on nominal US$ exchange rates.

5. If Pakistan was such a great investment destination - the value of its curreny should have increased given an increased demand in the international market putting upward pressure on the currency - Clearly the opposite has happened.

6. World does not care about performance in spurts- IT LOOKS AT A CONSISTENCE PERFORMANCE. Now clearly that 845% will look a very big figure if you were to take the 2001 figures given the IT bust preceded that and therefore it had a bearing on each and every economy pushing the valuations and therefore market cap of the indices down. Try and compare the scenario from 1999 onwards with the figures I provided.

7. Pakistan's debt rating was raised from B to B+ in 2009 while India's rating is at BBB- a difference of 4 notches (BB+, BB, BB-, B+) which is quite a bit.

8. Good you told me that you have been to India - I will inform the customs officer so that they clearly understand the objective of your visit the next time around.

Finally - Your points make no difference and I don't want to waste more time on explaining the basics to you. So please read some good investment books before coming up with unrealistic numbers. For starters you could try the McKinsey valuations book.

Rest you can have your view points but clearly I don't agree with them and neither does any Indian here on the forum. The last point on insurgencies, well we are quite in control at all fronts so don't worry about us.

 

[karan.1970]

We also beat this one to death on the other thread. Now that you are resurrecting it, let me tell you that market caps are judged relative to the national GDP.

KSE is only a small fraction of Pakistan's GDP, whereas BSE is about the size of India's GDP. Now, is that good thing?

I don't think so. With BSE's high market cap near India's GDP, and average PE ratio of 2X that of KSE, it just means that KSE has much more upside than BSE. I think BSE is a big bubble right now. KSE is the place to be, as far as my money goes.
Haq's Musings: Goldman, Franklin-Templeton Bullish on Pakistan's Economy

Haq.. Its the same thread.. Just go back 2 pages

That remains to be seen. Investors price stocks and economies not only on historical P/E but also forward P/E. So if the growth expectations are met consistently going forward, I dont see a crash. However multiple external events like a Europe financial crisis, or the currency crisis or the so called China bubble manifests itself, the impact will be akin to the 2008 where the crash was driven not by over pricing of equities but by external events in the USA and to some extent in Europe. And that is also re-emphasised by the steep curve of recovery in the India stock markets.....

BTW crashes driven by external events like above have a worse impact on smaller and less stable economies/markets like Pakistan. where the cuts are deeper and recovery is slower. The same can be seen in the data where the KSE fell significantly more than BSE (in dollar terms) in 2008 when the global fin crisis manifested itself. And now that recovery is on its way, KSE is moving up slower than BSE

 

[karan.1970]

I guess not, it seem the only thing you imagine is the total destruction of Pakistan. But, let me assure you, it'll remain a pipe dream for people like you whose toxic ill-will toward Pakistan is obvious from the posts here.

Dude.. you start a thread bashing India and then you blame Indians for holding toxic ill will towards Pakistan..??

 

[Chiru]

The KSE performance has been better than BSE, and the rest of the BRICs, in spite of the bomb blasts and other problems. Pakistan has, and continues to defy, all the doomsayers for years.

Now can you imagine how much better it will be once some measure of security ad stability returns?

I guess not, it seem the only thing you imagine is the total destruction of Pakistan. But, let me assure you, it'll remain a pipe dream for people like you whose toxic ill-will toward Pakistan is obvious from the posts here.

Do you know buy the rumor and sell the news? That's how speculative money works. People invest in penny stocks for a news once news is out it will be sold out.
If pakistani educated people are like you then no need of us. It will be in self destruction and already it is already on its way.

I wish more people in pakistan like you.

 

[ramu]

We also beat this one to death on the other thread. Now that you are resurrecting it, let me tell you that market caps are judged relative to the national GDP.

KSE is only a small fraction of Pakistan's GDP, whereas BSE is about the size of India's GDP. Now, is that good thing?

I don't think so. With BSE's high market cap near India's GDP, and average PE ratio of 2X that of KSE, it just means that KSE has much more upside than BSE. I think BSE is a big bubble right now. KSE is the place to be, as far as my money goes.

Haq's Musings: Goldman, Franklin-Templeton Bullish on Pakistan's Economy

Five top Indian companies w.r.t Market Cap
============================
ONGC $52,081,484,450
Reliance Inds. $39,718,613,340
NTPC $37,196,186,670
MMTC Ltd. $35,095,166,670
TCS $34,825,111,120

Five top Pak companies w.r.t Market Cap
============================

OGDCL $6,598,190,780
MCB $3,348,301,200
National Bank of Pakistan $2,535,651,497
Pakistan Petroleum $2,361,689,580
Standard Chartered Bank $2,056,344,910

1 : Market cap judged against GDP
Fair deal...
Lets try again this once cause I went through that thread and found it was beaten to death when the truth was not out of the dead body

The book value is the actual asset valuation. So do you think that is a good metrics ? The market cap of a company is proportional to its Book Value. Do you agree ?

 

[RiazHaq]

Haq.. Dude.. You repeated your post from 2 pages back on this thread only... Allow me to repeat my response





Also the PPP figure you are ridiculing is also used by worldbank. Just because a metric shows Pakistan in a worse light, it doesnt become questionable. While i agree its an approximation, you cant just ignore an indicator used by all world bodies..Any way, even the nominal GDP per capita, India is better of by over 10%

On CAGR, your choice of periods in arbitrary to suit your point.

On PPP figures, the most recent and detailed real per capita income data was calculated and reported by Asian Development Bank based on a detailed study of a list of around 800 household and nonhousehold products in 2005 and early 2006 to compare real purchasing power for ADB's trans-national income comparison program (ICP).

The ABD ICP concluded that Pakistan had the highest per capita income at HK$ 13,528 (US $1,745) among the largest nations in South Asia. ADB reported India’s per capita as HK $12,090 (US $1,560). Nominal per capita GDP estimates for Pakistan range from US $1000 to US $1022, while the range for India is from US $ 1017 to US $ 1100. Purchasing power parity (PPP) per capita GDP estimates for Pakistan from various sources range from $2500 to $2644, while the same sources put the range for India's per capita GDP from $2780 to $2972.

http://www.adb.org/Documents/Reports/ICP-Purchasing-Power-Expenditures/Highlights.pdf

List of countries by GDP (PPP) per capita - Wikipedia, the free encyclopedia

 

[Mahakaya]

As for the upside potential - It is based on a relative valuation multiple like the P/E and EV/EBIT OR EBITDA ratios if you understand what that is.

You cannot draw an inference on undervaluation and overvaluation unless the indices or companies in consideration are TRUE COMPARABLES. What you are doing is an Oranges to Apple comparison and not an Apples to Apples comparison. Size makes a lot of difference in valuations. Apart from that when you consider comparing two economies you need to factor in the Sovereign Risk of the country, which of course right now is very high for Pakistan - a good indicator is the difference in the CREDIT RISK that I mentioned in my previous response.

Till the time your market grows (and if it grows), India will enter a stable growth period - So till then you have a lot of catching up to do!

 

[RiazHaq]

Five top Indian companies w.r.t Market Cap
============================
ONGC $52,081,484,450
Reliance Inds. $39,718,613,340
NTPC $37,196,186,670
MMTC Ltd. $35,095,166,670
TCS $34,825,111,120

Five top Pak companies w.r.t Market Cap
============================

OGDCL $6,598,190,780
MCB $3,348,301,200
National Bank of Pakistan $2,535,651,497
Pakistan Petroleum $2,361,689,580
Standard Chartered Bank $2,056,344,910

1 : Market cap judged against GDP
Fair deal...
Lets try again this once cause I went through that thread and found it was beaten to death when the truth was not out of the dead body

The book value is the actual asset valuation. So do you think that is a good metrics ? The market cap of a company is proportional to its Book Value. Do you agree ?

The market cap has nothing to do with book value. If it did, there wouldn't be such wide spreads in PE ratios in different markets at different times.

 

[ramu]

Pakistan's per capita:-- $2500 to $2644
India's per capita: ------$2780 to $2972

OK, Lets us agree that the figures you have presented are right. Both look pathetic to say the least.

 

[RiazHaq]

As for the upside potential - It is based on a relative valuation multiple like the P/E and EV/EBIT OR EBITDA ratios if you understand what that is.

You cannot draw an inference on undervaluation and overvaluation unless the indices or companies in consideration are TRUE COMPARABLES. What you are doing is an Oranges to Apple comparison and not an Apples to Apples comparison. Size makes a lot of difference in valuations. Apart from that when you consider comparing two economies you need to factor in the Sovereign Risk of the country, which of course right now is very high for Pakistan - a good indicator is the difference in the CREDIT RISK that I mentioned in my previous response.

Till the time your market grows (and if it grows), India will enter a stable growth period - So till then you have a lot of catching up to do!

Large, stable markets usually have less growth than small, growing markets.

 

[ramu]

The market cap has nothing to do with book value. If it did, there wouldn't be such wide spreads in PE ratios in different markets at different times.

Read my post properly !!!

The book value is the actual asset valuation. So do you think that is a good metrics ? The market cap of a company is proportional to its Book Value.

Let us forget market cap for now. Can we compare on book value ?

 

[Chiru]

Large, stable markets usually have less growth than small, growing markets.

There is high chance of loosing shirt also.