Haq's Musings: Pakistan Stock Index KSE-100 Among World's Top 5 Performers in 2013
Karachi's KSE-100 Stock Market Index was up 49.4% in 2013, beating all but four stock indices in the world. It handily beat Morgan Stanley's MSCI emerging market index which remained essentially flat. By comparison, India's main stock index rose just 8.89% in the same period. The remaining three BRIC countries--Brazil, Russia and China-- all saw their key stock indices decline in 2013.
KSE-100 vs MSCI Emerging Markets Index Source: Wall Street Journal
This is a continuation of the bullish trend seen in 2012 when KSE-100 also rose nearly50% to top all Asian market indices. As of December 31, 2013, KSE-100 is up 329% since the end of 2008. It is being driven mainly by rapid growth in revenue and profits of the listed companies. Even after the strong run-up, the market still remains cheap—currently trading at over nine times trailing 12 month earnings—a common valuation measure used by stock analysts, according to Wall Street Journal.
World Stock Indices Performance 2013 Source: Seeking Alpha
Dubai finished up the most in 2013 with a gain of 107.69%. Japan was up the fourth most with a gain of 56.72%, making it the best performing G7 country. The US ended up in 9th place globally with a gain of 29.6%. Of the other G7 countries, Germany finished third with a YTD gain of 25.48%, followed by France (17.99%), Italy (16.56%), the UK (14.43%) and Canada (9.55%), according to Seeking Alpha.
The fresh investor optimism in 2013 was triggered by the election of Prime Minister Nawaz Sharif whose government is seen to be business-friendly by investors and businessmen. His finance minister Ishaq Dar claimed that Pakistan's gdp growth accelerated to 5% in July-Sept quarter in 2013. It was driven by large-scale manufacturing (LSM) which grew 12.76 per cent in September 2013 from a year ago.
"Pakistan has a fairly diverse economy with a large and young population that needs to be fed and supplied basic infrastructure such as electricity," Wall Street Journal quoted Caglar Somek, global portfolio manager at Caravel Management in New York, as saying. He manages around $650 million of investments. "If you find the companies that supply those basic needs, growing at double digit with high profitability, you can buy them at valuations that are on average 30% to 40% cheaper than their emerging market peers," said Mr. Somek.
Since the general elections of May, 2013, Pakistan has seen smooth power transfer from one civilian government to another. Other major transitions include the change of President, Army Chief and the nation's powerful Chief Justice of the Supreme Court.
Power cuts are now less frequent payment of power generation companies overdue bills by the federal government. Financing has been closed on several power projects, including ADB financing of a majot coal-fired plant in Jamshoro and Chinese loans for the nation's largest nuclear power plant planned for Karachi.
Progress on economic front, however, is not matched by similar progress on the security front which remains the biggest concern for the future of the country and its economy. What is needed is a comprehensive anti-terrorism strategy and plan of action soon.
Haq's Musings: Pakistan Stock Index KSE-100 Among World's Top 5 Performers in 2013
Karachi's KSE-100 Stock Market Index was up 49.4% in 2013, beating all but four stock indices in the world. It handily beat Morgan Stanley's MSCI emerging market index which remained essentially flat. By comparison, India's main stock index rose just 8.89% in the same period. The remaining three BRIC countries--Brazil, Russia and China-- all saw their key stock indices decline in 2013.
KSE-100 vs MSCI Emerging Markets Index Source: Wall Street Journal
This is a continuation of the bullish trend seen in 2012 when KSE-100 also rose nearly50% to top all Asian market indices. As of December 31, 2013, KSE-100 is up 329% since the end of 2008. It is being driven mainly by rapid growth in revenue and profits of the listed companies. Even after the strong run-up, the market still remains cheap—currently trading at over nine times trailing 12 month earnings—a common valuation measure used by stock analysts, according to Wall Street Journal.
World Stock Indices Performance 2013 Source: Seeking Alpha
Dubai finished up the most in 2013 with a gain of 107.69%. Japan was up the fourth most with a gain of 56.72%, making it the best performing G7 country. The US ended up in 9th place globally with a gain of 29.6%. Of the other G7 countries, Germany finished third with a YTD gain of 25.48%, followed by France (17.99%), Italy (16.56%), the UK (14.43%) and Canada (9.55%), according to Seeking Alpha.
The fresh investor optimism in 2013 was triggered by the election of Prime Minister Nawaz Sharif whose government is seen to be business-friendly by investors and businessmen. His finance minister Ishaq Dar claimed that Pakistan's gdp growth accelerated to 5% in July-Sept quarter in 2013. It was driven by large-scale manufacturing (LSM) which grew 12.76 per cent in September 2013 from a year ago.
"Pakistan has a fairly diverse economy with a large and young population that needs to be fed and supplied basic infrastructure such as electricity," Wall Street Journal quoted Caglar Somek, global portfolio manager at Caravel Management in New York, as saying. He manages around $650 million of investments. "If you find the companies that supply those basic needs, growing at double digit with high profitability, you can buy them at valuations that are on average 30% to 40% cheaper than their emerging market peers," said Mr. Somek.
Since the general elections of May, 2013, Pakistan has seen smooth power transfer from one civilian government to another. Other major transitions include the change of President, Army Chief and the nation's powerful Chief Justice of the Supreme Court.
Power cuts are now less frequent payment of power generation companies overdue bills by the federal government. Financing has been closed on several power projects, including ADB financing of a majot coal-fired plant in Jamshoro and Chinese loans for the nation's largest nuclear power plant planned for Karachi.
Progress on economic front, however, is not matched by similar progress on the security front which remains the biggest concern for the future of the country and its economy. What is needed is a comprehensive anti-terrorism strategy and plan of action soon.
Haq's Musings: Pakistan Stock Index KSE-100 Among World's Top 5 Performers in 2013
