There is a lot more to a stock market than just profitability and indices. The market volume can change drastically between Bullish to Bearish. The kSE had doubled in the last 18 months, no other market has literally doubled in volume. This also doesn't mean that KSE is now above the Chinese and Indian markets either. How could that be? 1 Billion people will have far more companies, jobs and needs than 200 million people. That's common sense.
However, the bigger countries start to get saturated too, as they've been getting investments for a long time. In India's case, she's been getting a lot of investments externally since the 90's. Now the cost of living has gone up significantly and the profits are shrinking for these companies due to profit. Doesn't mean its bad market, it just means it is more stable. Same for the Chinese markets, etc. But some of these markets still return 15-25% per year which is really good. Some even 30%.
The relevance in Pakistan and Nigeria's case is that these two are now starting their economic growth. Due to that, even if the return on investments is at or below some other market, long term, there is a lot of profit to be made, just because unlike India, China or Brazil, these countries are now starting out as "Emerging Markets". BRIC (Brazil, Russia, India and China), was a90's thing so those markets have become more stable.
Good and positive indicator for our economy but we also need some serious reforms in our taxation and privatization sectors.
What's more important? Chicken or the Egg? If you want to cook the Chicken.....you won't have eggs again. Taxation related reforms will happen. But on a poor, weak system, what would increased tax do? Cripple the already poor people??
Point is, first the investment that is coming in, needs a place, i.e. projects to be applied to. As the initial projects (Infrastructure, Ports, Telecom, Public Transportation), start to complete in the next a couple of years, you'll be creating a few Million Much Needed jobs to expand the economy. That's your baseline. Once that happens, trust me, the Tax laws will be updated. No system can work successfully without Tax reforms. No Government wants to leave money on the table as taxes run the country and provide funding to help setup welfare programs, debt payoff, savings, and all.
I was saying that kse reached up to 31000 level and its return was ranked 3rd and even then we see a lot of unemployed, no tangible investment despite of ,the assumption of this barometer i-e kse shows investors confidence, the fact that investors are showing great confidence.
Agreed. Because tax reforms commission has conducted its second meeting some days ago and in February or march it is going to present its final report or recommendation under the supervision of finance minister ishaq darr.
Ok, I see where you going with this. KSE doubled in the past 18 months for all intensive purposes. That's pretty big. It does show investor's confidence as you've mentioned.
Now, what needs to happen is that the project in the pipeline need to finish. There are four most critical elements to grow an economy and sustain it: (1) Having investor confidence (2) having ongoing work to use the initial investment, put the money into something where it generates more profit and (3) New job creation and salary / market adjustments for the current jobs or levels (4) Taxation changes, with breaks for investors and proper tax brackets for people to pay.
So you have number 1: the investor's confidence in the KSE and at the Government level, almost $ 75 billion investment has been promised and more in the pipe line. Now if Pakistan can complete its few main projects (Electric production, Dams, some Highways, Metro, Coal Power, Gas Pipeline, linking Gawader to other areas), then you'd have created more jobs too, as all the above require Engineers, Managers, to Ordinary Labor. With this done, the next step is to sustain the economy so these projects produce profit, people can remain employed and the money / profit is used to start other projects, and the tax comes in and gets rid of the National Debt, slowly. That's when you'll see unemployment rates going down. I think I mentioned two more years, starting January, 2017, Pakistan will come up as one of the best emerging markets between its class, with NO terrorism, political stability and a stable democratic base, on which, the next generations of Pakistan (the current youth) will build upon.
