KARACHI: Foreign investors are pushing funds back into Pakistani stocks, setting the market up for its second best year for inflows in a decade, drawn by cheap valuations and some economic and security improvements.
Such investments may be paying off as well because the main Karachi stock index is one of the few markets in Asia showing a rise since the beginning of the year.
While the benchmark MSCI Asia index is down 11 per cent this year, the Karachi Stock Exchange (KSE) is up three per cent.
“Pakistan remains one of the cheaper markets in Asia and an emerging market with improving domestic situation and a stabilising economy,” said Mark Mobius, executive chairman at Templeton Asset Management Limited.
Net foreign portfolio investments into the stock market reached more than $530 million in the first 11 months of 2009/10, compared with an outflow of $408 million a year earlier.
If that holds to the end of the July-June fiscal year, it would mark the biggest net foreign investment in more than 10 years, apart from 2007.
The economy is also pulling out of the global downturn and this year the government expects a growth above four per cent compared with a record low growth of 1.2 per cent last year.
In addition, the inflow figures have been flattered by the lifting of a KSE trading floor, which had stopped investors selling below 9,144 points between August and December 2008. Brokerage Invest and Finance Securities Limited says that the lowest one-year forward price-to-earnings ratio in Asia of just 6.25 is also drawing funds. That’s less than half the China’s level, it says.
“Of course investors are interested in seeing fewer terrorist attacks, but many investors have become inured to such situations knowing that they are isolated incidents,” Mobius said. REUTERS
Published in the Express Tribune, June 11th, 2010.
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