India to Borrow and Spend More in 2010-2011

[RiazHaq]

What a load of Cr ap.. Between 1 Mar 2000 and 30 Apr 2000, KSE closed over 2000 in 9 sessions..
^KSE: Historical Prices for - Yahoo! Finance


Anyway, I used the High of Mar 2000 and High of Mar 2010 (on the given date) for calculations..Your logic that I was misleading and cherry picking (as you normally do) would have held water had I not done the same for ^BSE. However, for BSE, unlike KSE, the high of March 2000 came back only in Dec 2003




May be you havent heard the concept of trailing returns, but that is also normally used...



KSE HIgh in Mar 2000 - 2073
KSE High in Mar 2010 - 10224

10 year CAGR - 17.3%

Currency movement - 1/52 to 1/84.5

In USD
KSE HIgh in Mar 2000 - 39.86
KSE High in Mar 2010 - 120.99

10 year CAGR - 11.74%


Even if I take the the dates that you provided (incidently the year close in India is March 31 and not Dec 31) still the currency adjusted variation between the 2 indices is 15% and 12.5%. And my previous arguement stands that the extra reward in KSE does not justify the excessive risk that set of stocks offer due to the small size of the capital markets and the turmoil in the country. This is specially visible if you take 2 year, 3 year and 5 year currency adjusted trailing returns (CAGR) for the 2 indices..

KSE :
2 yr: -30%
3 Yr: -14%
5 Yr: -7%

BSE
2 yr: -6%
3 Yr: +8%
5 Yr: +19%

This is what I meant by risk reward ratio...

I think you are deliberately and selectively picking dates and peaks to make your point.

For example, you have picked the highest peaks of the period in March 2000 to make your point, while ignoring the overall trend for the 5 year and ten year period that was up. Simply connecting the peaks is never done in calculating performance...it's highly misleading.

The bottom line remains that KSE-100 has been very competitive and performed exceptionally well for a decade, in spite of many misleading detractors like you.

And it did so again last year, rising 55% in dollar term.

 

[RiazHaq]

The high returns on shares in KSE are based on the exceptional real performance of sectors such as banking, telecom, energy and autos in the last decade.

For example in 2008, Pakistan's Muslim Commercial Bank (MCB) was ranked by Asia Money as the most profitable bank in Asia with 32.5% return on equity (ROE). Other Pakistani banks ranked in the top 10 included Allied Bank ranked fourth with 29% ROE and United Bank ranked 6th with 24.8% ROE.

Haq's Musings: Financial Services Sector in Pakistan

 

[Prometheus]

I think you are deliberately and selectively picking dates and peaks to make your point.

For example, you have picked the highest peaks of the period in March 2000 to make your point, while ignoring the overall trend for the 5 year and ten year period that was up. Simply connecting the peaks is never done in calculating performance...it's highly misleading.

The bottom line remains that KSE-100 has been very competitive and performed exceptionally well for a decade, in spite of many misleading detractors like you.

And it did so again last year, rising 55% in dollar term.

tried to check the link you gave..............antivirus gave warning that "This site might harm your computer"????
Can I have another link sir?

 

[indian_musing]

tried to check the link you gave..............antivirus gave warning that "This site might harm your computer"????
Can I have another link sir?

Please don't visit the site. The whole purpose of this thread is ad to his blog.

 

[RiazHaq]

tried to check the link you gave..............antivirus gave warning that "This site might harm your computer"????
Can I have another link sir?

This is just nonsense. The website has been verified as safe by Norton and McAfee, the two top computer security software firms in the world.

 

[Prometheus]

This is just nonsense. The website has been verified as safe by Norton and McAfee, the two top computer security software firms in the world.

But why Bitdefender is blocking it?????

It is also one of the top computer security firm!!!

Can you provide me another link?
that article might have published some where else also

 

[Prometheus]

Please don't visit the site. The whole purpose of this thread is ad to his blog.

havent visited because my antivirus didnt allowed me

 

[RiazHaq]

But why Bitdefender is blocking it?????

It is also one of the top computer security firm!!!

Can you provide me another link?
that article might have published some where else also

If it's a problem with your software, spend a little money and get better software like Norton or McAfee.

 

[karan.1970]

I think you are deliberately and selectively picking dates and peaks to make your point.

For example, you have picked the highest peaks of the period in March 2000 to make your point, while ignoring the overall trend for the 5 year and ten year period that was up. Simply connecting the peaks is never done in calculating performance...it's highly misleading.

The bottom line remains that KSE-100 has been very competitive and performed exceptionally well for a decade, in spite of many misleading detractors like you.

And it did so again last year, rising 55% in dollar term.

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%

 

[Mahakaya]

The high returns on shares in KSE are based on the exceptional real performance of sectors such as banking, telecom, energy and autos in the last decade.

For example in 2008, Pakistan's Muslim Commercial Bank (MCB) was ranked by Asia Money as the most profitable bank in Asia with 32.5% return on equity (ROE). Other Pakistani banks ranked in the top 10 included Allied Bank ranked fourth with 29% ROE and United Bank ranked 6th with 24.8% ROE.

Haq's Musings: Financial Services Sector in Pakistan

Listen buddy - I understand your emotions. I AM A BUY SIDE ANALYST WITH AN INVESTMENT HOUSE - The RoE you quoted makes it profitable - but not a SAFE INVESTMENT - What is the RISK OF INVESTING IN THAT BANK - ANY IDEA - The risk people assess not only the company risk (which ofcourse is diversifiable) but the ECONOMIC AND POLITICAL RISK TOGETHER KNOWN AS SOVREIGN RISK! So whoever wrote this article has very little sense of investing and does not understand the concept of RISK AND RETURN!

You dont look at the return in isolation with its risk in this case "THE COST OF EQUITY" - what was the cost of Equity for that bank or as a matter of fact for the other banks you mentioned.

I can give you a fair idea if you give me the rate of 10yr Pakistani Bond?

 

[Mahakaya]

The high returns on shares in KSE are based on the exceptional real performance of sectors such as banking, telecom, energy and autos in the last decade.

For example in 2008, Pakistan's Muslim Commercial Bank (MCB) was ranked by Asia Money as the most profitable bank in Asia with 32.5% return on equity (ROE). Other Pakistani banks ranked in the top 10 included Allied Bank ranked fourth with 29% ROE and United Bank ranked 6th with 24.8% ROE.

Haq's Musings: Financial Services Sector in Pakistan

Do you really wanna make comparisons - REALTY SECTOR IN INDIA rose at an average of 300% compounded annually from 2001, I can name many such sectors in the Indian Market - Like Telecom, Infra, Auto, Financial Services, Power, etc etc.

Dont even come up with this versus thread because there is no point and I will BEAT YOU HANDS DOWN ANY DAY!

So Stick to the topic of the thread not unnecessary talk.

 

[RiazHaq]

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%

I am not sure how you are making up these numbers to suit your conclusions. If you look on the last page of the Economist magazine, it carries performance figures for several stock exchanges, including Karachi and Mumbai.

Here they are for 2009:

India (BSE) 93%

Pakistan (KSE) 57%

With India's PE ratios more than twice those of Pakistan's, and the total market cap closing in on the total GDP, there is a big asset bubble growing in Mumbai.

The last time India's market exceeded its GDP was in 2008, and it was followed by a big crash. If I were you, I'd brace myself for anther crash here.

 

[RiazHaq]

Do you really wanna make comparisons - REALTY SECTOR IN INDIA rose at an average of 300% compounded annually from 2001, I can name many such sectors in the Indian Market - Like Telecom, Infra, Auto, Financial Services, Power, etc etc.

Dont even come up with this versus thread because there is no point and I will BEAT YOU HANDS DOWN ANY DAY!

So Stick to the topic of the thread not unnecessary talk.

The Satyam scandal proves that there is nothing safe in Indian markets either. Nothing of that scale has happened in Pakistan.

Let's not forget that the former chairman of Satyam, a name that literally means "truth" in Sanskrit, said he cooked up key financial results, including a fictitious cash balance of more than $1 billion, raising doubts about the IT revolution hype in India that has attracted many international companies and significant foreign investments to India.

Haq's Musings: Satyam Scandal Hurts Confidence in India

 

[Mahakaya]

I am not sure how you are making up these numbers to suit your conclusions. If you look on the last page of the Economist magazine, it carries performance figures for several stock exchanges, including Karachi and Mumbai.

Here they are for 2009:

India (BSE) 93%

Pakistan (KSE) 57%

With India's PE ratios more than twice those of Pakistan's, and the total market cap closing in on the total GDP, there is a big asset bubble growing in Mumbai.

The last time India's market exceeded its GDP was in 2008, and it was followed by a big crash. If I were you, I'd brace myself for anther crash here.

A BIG BUBBLE - Hmm can you explain your theory here!

Also - Market Cap can be above GDP - Its the same case a companies revenues and it market cap - A company's market cap is many times more than its revenues.

As for 2008 - It was a crash in January and was caused by the liquidity crisis i.e. Foreign Investors pulled their money out of the developing countries leading to a big crash in the markets.

You see all the countries in the world and you will see that dip in every country's stock exchanges. IT IS MACROECONOMIC FACTORS WHICH ARE NON DIVERSIFIABLE!

 

[karan.1970]

I am not sure how you are making up these numbers to suit your conclusions. If you look on the last page of the Economist magazine, it carries performance figures for several stock exchanges, including Karachi and Mumbai.

Here they are for 2009:

India (BSE) 93%

Pakistan (KSE) 57%

The numbers I have mentioned are adjusted for Dollar exchange rate for PKR and INR. I dont know what month of economist you are looking at, but these numbers are made by Yahoo Finance. Go and check the month closing figures for Mar 2000, Mar 2005, Mar 2007, Mar 2008 and Mar 2010. Also check the Currency rates for PKR/USD and INR/USD for these months and do the math.. Thats called calculations and not making up numbers...

With India's PE ratios more than twice those of Pakistan's, and the total market cap closing in on the total GDP, there is a big asset bubble growing in Mumbai.

The last time India's market exceeded its GDP was in 2008, and it was followed by a big crash. If I were you, I'd brace myself for anther crash here.

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.....