Habib’s optimism is based on his own experience investing in Pakistan.
These new entrepreneurs will be helped by the government’s newfound will to privatize: “They’re planning on raising $1.5 million, so yes, there is a real dedication to offer companies up to international and domestic investors.” According to Habib, “The government is not only increasing their shareholding but also investing more in state owned companies. So these governments owned companies are doing really well, and that is what is going to attract more investors.”
In fact he goes on to say: “By the end of the calendar year I think the market will reach the 25,000 point level.” [KSE is currently above the 23,000 point level].
Habib also sees potential in recently troubled areas. In reply to the question which sectors were expected to show the most growth, Habib highlighted the industrial sector, affected by the energy crisis, and fertilisers, affected by the gas shortage. The reasoning? “There is lot of scope in industrial sector because of the energy shortage, because that means that some of the units are functioning at less than their full capacity, and are underutilising electricity. It all depends on whether the government can come up with some suitable formula to provide [electricity] to the industrial sector.”
Habib also sees remittances from abroad as untapped potential. “Pakistanis send $14 billion annual in remittances, but they also send another $6 billion through the havala process. So non-resident Pakistanis send $20 billion annually. Obviously those people aren’t sending all of their income, so if 50% is being saved, then that gives you annual earnings of $40 billion.” If Pakistan can give those non resident Pakistanis confidence, according to Habib, not only will Pakistanis abroad invest back home, but they will also influence foreigners to invest too. Already investors from the Middle East, UK, China and Japan are looking into Pakistan, as per Habib.
Habib’s optimism is based on his own experience investing in Pakistan. When asked about whether wealth is leaving the country though offshore accounts, he seemed genuinely surprised. “Profitability margin in Pakistan in much better than in other places. The stock market has an excellent annual return for 36% on average and the rupee has depreciated by 6%. This makes Pakistan very, very attractive for investors.” As for the money leaving: “It’s only money earned through bribes to buy real estate in Dubai or Malaysia” – an unfortunate inconvenience, but nothing more. The formal sector so far seems interested in staying put.
The current bullish run continuing still has its share of issues. Inflation is one. “The government is set to increase electricity prices that will definitely add to inflation. This will put pressure on prime lending rates in Pakistan”, says Habib. The fiscal deficit is another: “For me that is a really worrying sector. It increases the liability of government and is crowding out the private sector by taking loans from the banking sector.”
And while Habib may highlight fertilizers as an emerging sector, his own Fatima Fertilizers has been plagued by problems. Fatima Fertilizer is the only maker of calcium ammonium nitrate (CAN) in Pakistan, a substance that the US thinks is used to make explosives. While refusing to comment on whether rumours that the formula of CAN is being changed are true, Habib did point out that the packaging has been changed to dissuade sales in the northern areas. As for his personal feelings about a Pakistani company being pressured by the US like this: “I would like to clarify that that is not the case and we are cooperating with both the government and international companies.”
Habib also defended claims that the stock market would not have done so well if sources of funds had been questioned. In 2012 the government came out with a scheme that investors in the capital market for 90 days between March and June would not be asked sources of funds. This apparently led to the current boom the KSE is experiencing. Yet according to Habib, only 1% of all transactions actually availed this scheme. “See, those with funds were already investing. Investment was only low for those smaller people creating a hue and cry so the government gave them this scheme...really, it was just to appease some sort of psychological issue.”
Finally, looking ahead, which three companies would Habib buy right now if he could? “Sui Southern Gas, Pakistan Petroleum and Fauji Fertilizers. The financial results of Sui have improved as their unaccounted for gas (UFC) number has gone down. Pakistan Petroleum reserves are expected to do much better because of the circular debt problem being resolved. And Fauji has been making good profits and has always had a sound record.
Published in The Express Tribune, August 5th, 2013.
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US$ 1.5 BILLION and not US$ 1.5 MILLION.
Where is the money you took from the small investors and then closed the market to save your skin?
In May CPI was recorded around 5.1 % and for July it was 8.26% I think Central Bank will raise the policy rate to control the inflation which is now moving towards an upward trajectory Based on the fact that despite reducing the Policy Rate by around 300 bps in the previous govt and that stance was taken to only meet the govt borrowing to finance the budget deficit which leads to crowding out of pvt sector which was already suffering from energy crisis and law and order especially in a mega city Karachi contributing approx. 70 % revenue to the govt exchequers and souring the inflation to double digits .The SBP will raise the discount rate/ tight monetary policy as per IMF ($5.3 billion EFF) program preconditions ,the govt need to control the budget deficit which is around 7% as per budget which in my viewpoint can be further reduced to 6% through privatization of PSEs
By looking at the returns on different investment opportunities the readers will clearly understand the true potential of KSE which I believe is still underperforming. It as made a tremendous returns in the last 20 -30 yrs with an average annual return of 30 -35 % while others like in commodities real estate 15 %, Government securities like T bills around 9%, NSC 10 % and most surprisingly KSE return in fiscal year 2013 it was 51 % like if you invested 100000 PKR in June 2012 you would get PKR 151000 in return that is very lucrative and it still be. For prospective investors I recommend to pick up the following stocks
Banking Stocks - Reason: Hike in discount rate most probably in the next momentary policy announcement will improve the profitability of the banks which will improve their fundamentals and one thing more that majority of the banking stocks are undervalued it reflects there is huge potential in it.
Cement Stocks –Reason: The Nawaz Government have emphasized on PSDP for infrastructure development like building dams in collaboration with China, this will increase in the cement dispatch and improve the industry fundamentals
Fertilizer Stocks –Reason: Uninterrupted gas supply was assured by the Government so it means that the production level will reach to its optimum capacity in future
I would recommend investors don’t leave the battle ground haha means don’t starting selling off due to short term bearish trend in KSE and based on the fundamental I also believe that it will touches the ballpark of 25000 points level in Fiscal Year 2014
look at the returns from different investment opportunities like real estate give you around 12 % per annum , gold 15 % , NSC 10% and the KSE in last 20 yrs gave an avg annual return of 30 - 35% and most surprisingly in the fiscal yr 2013 that return shoots upto 51 % beating the other performers in the South Asian Markets i would recommend to pick up banking stocks reason : Possible hike in discount rate in the next monetary policy announcement which will improve the profitability margins in the banking sector , and most of the banking stocks are undervalued which reflects that there is huge growth potential in it Fertilizer sector will be the next preference due to interrupted gas supply assured by the Govt. Cement Sector will also attractive for investment b/c Nawaz govt has emphasized on PSDP programme for infrastructure development like Dams in collaboration with China and in this way for an investor the future prospect of the KSE still bright touching 25000 points in FY 2014
In May CPI was recorded around 5.1 % and for July it was 8.26% I think Central Bank will raise the policy rate to control the inflation which is now moving towards an upward trajectory Based on the fact that despite reducing the Policy Rate by around 300 bps in the previous govt and that stance was taken to only meet the govt borrowing to finance the budget deficit which leads to crowding out of pvt sector which was already suffering from energy crisis and law and order especially in a mega city Karachi contributing approx. 70 % revenue to the govt exchequers and souring the inflation to double digits .The SBP will raise the discount rate/ tight monetary policy as per IMF ($5.3 billion EFF) program preconditions ,the govt need to control the budget deficit which is around 7% as per budget which in my viewpoint can be further reduced to 6% through privatization of PSEs
Grand words coming from the king of front running.
Too optimistic when the nation is soliciting IMF facility. No one with the right mind accepts Pakistan risk, both financial and political. GOP and provincial Govts are whimsical when it comes to taxation policies. They force arbitrary taxes on people, like the recent Property Tax in Punjab. Businessmen don't like arbitrariness and hence will never invest.