Pakistan's Market Leaves India's And China's In The Dust

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  Panos MourdoukoutasContributor
  I cover global markets, business and investment strategy
  
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  MARKETS 11/28/2016 @ 4:55PM 11,038 views
  Pakistan's Market Leaves India's And China's In The Dust
  
  Unshaken by the rise in US interest rates, Pakistan’s equity markets continue to beat China’s and India’s markets by a wide margin. In the last twelve months, Global X MSCI MSCI +% Pakistan ETF was up 16%, beating India’s and China’s comparable ETF’s, which were in negative territory for the year – see table.
  
  Index/Fund 12-month Performance
  Global X MSCI Pakistan (NYSEAK) 16%
  IShares China (NYSE:FXI) -1.5%
  iShares S&P India 50 (NASDAQ:INDY) -3.24%
  iShares MSCI Emerging Markets (NYSE:EEM) 1.10%
  Source: Finance.yahoo.com 11/23/2016
  
  Index/Fund 12-month Performance
  Global X MSCI Pakistan (NYSEAK) 20%
  IShares China 9.80%
  iShares S&P India 50 12.77%
  iShares MSCI Emerging Markets
  
  
  5.38%
  Source: Finance.yahoo.com 9/14/2016
  
  That’s contrary to what one would have expected. India has become more competitive in the global economy recently, rising by 16 rankings in 2016 to the 39thposition, while it is still at 122th position, near the bottom of the World Forum ranking—see table.
  
  Country 2016 2015
  India 39 55
  China 28 28
  Pakistan 122 126
  Source: World Competitiveness Index, World Economic Forum.
  
  There’s more: Pakistan has been lagging behind both India and China in key macroeconomic metrics like GDP growth rates and unemployment—see table.
  
  Pakistan’s, India’s and China’s Key Metrics
  
  Country China India Pakistan
  GDP $10866 billion 2074 billion $270 billion
  GDP Growth yoy 6.7% 7.1% 4.24%
  Unemployment 4.05% 4.9% 5.9%
  Inflation Rate 1.3% 5.05% 3.56%
  Capital flows -594 HML -$300 million -$1882 million
  Government Debt to GDP 43.9% 67.2% 64.8%
  Still, there are a few good explanations for the Pakistan’s market lead over India and China.
  
  Pakistan is a frontier market economy, while India and China are emerging market economies. This means that Pakistan’s economy is less exposed to the global economy than India and China. Thus, it is less vulnerable to interest rate fluctuations in developed countries, most notably in the US.
  
  Then there’s the pouring in of Chinese investment, which is turning Pakistan into Beijing’s corridor to Middle East oil and to Africa’s riches.
  
  Add to that a couple of overseas endorsements for Pakistan’s market reforms from overseas institutions that have been hyping investor expectations. Like $1 billion in support from the World Bank – and a couple of domestic acquisitions from foreign suitors like the acquisition of Karachi’s K-Karachi by Shanghai Electric Power Co.
  
  While Pakistan’s market has been getting praise from overseas institutions and investors, India’s markets have been rattled by Modi’s experimentations with the country’s currency, as I wrote in a previous piece here. And China’s markets have been unsettled by the return of heavy-handed government policies, which have scared away foreign investors.
  
  To be fair, frontier markets are highly volatile, with one year’s big winners turning into next year’s big losers. Besides, with a big run up over the last five years, the big gains are already behind, for now. Investors should be very careful in establishing new positions at this time.
  
  
  
  http://www.forbes.com/sites/panosmo...s-indias-and-chinas-in-the-dust/#348244356cd9

All the best!