Opinion: Stock investors must try to avoid miscalculations

Lots of opportunities abound at home, elsewhere.

KARACHI: The Karachi Stock Exchange is a cruel market. You make miscalculations and you pay with your life. If you are fond of almonds, you will occasionally bite a bitter almond and that will be the end.

Is there a way to avoid this? Yes there is. Hold your nerve. Do not take your opinion of the market as the ultimate truth.

The Pakistani market is just too small. It’s vulnerable all the time to manipulation by the big boys and mutual funds.

To make real money, the small man, the ordinary investor, for whom the market was created and who is cannon fodder to these manipulators, must look elsewhere.

This is the season of mergers and acquisitions. It is a season of recapitalisation. This is the season of the IPOs and their magical transformation of the investors’ fortune.

It is a season where India is leading the sub-continent in its search for growth. The creation of a South Asian market for growth of assets is a great idea. It carries with it a potential to transform the fortunes of investors.

Should the investor then look inwards? Should he not participate in the growth that is available all over the world?

But first let’s concentrate on the opportunities available in the domestic market. Then, consider opportunities in the South Asian market. Thereafter, consider opportunities available internationally. This will give a rich universe of opportunity.

Many companies have applied for listing on the KSE. They should be available this year or next. Each one of these is an exciting prospect.

Book-building of Engro Powergen Qadirpur is expected to begin in July. Engro Powergen Limited owns and operates the company, a 220-megawatt power plant and the group’s first initiative in the power sector, which is 10% directly owned by the holding company and 84% via Engro Powergen. The remainder is owned by the International Finance Corporation and employees.

In 2010, Engro Powergen entered into a joint venture with the Sindh government to establish the Sindh Engro Coal Mining Company for mining coal from Thar Block-II. A wholly-owned subsidiary, Thar Power Company, was incorporated with the objective of developing power plants.

Other companies expected to be listed are Yamaha Motor Company, Hyderabad Electric Supply Company, Heavy Electrical Complex and BBJ Pipe Industries.

Yamaha seems to be the second profitable choice after Engro Powergen. Yamaha has a tragic history. It grew to take on the mighty Dawood juggernaut, but failed. Today, it is being reborn. The past is a foreign land. May be, the present will be better.

To this list, one must add the success stories that have rejuvenated the market. Hascol has been an unqualified success. When I advised investors and brokers to buy, they all told me it was an over-priced script. The rest is history.

We must not forget to mention PTCL and OGDC and the effect they have had on the market’s rise. To this list, one must add the recent discovery of oil reserves in Ghauri X-1 well near Jhelum, which can produce up to 5,500 barrels a day.

Mari Petroleum Company is the operator of Ghauri joint venture with Pakistan Petroleum Limited (PPL) and MOL.

This is the second recent discovery as the company had earlier found gas reserves in Sujjal well. So look for spillover effects on the shares of Mari and PPL. MOL is not listed.

Now turn attention to what is happening elsewhere. Though there are opportunities in South Asia, the real action relates to international IPOs. If there is one IPO that I would place all my money on, it is the IPO of Alibaba.

What a magnet the Alibaba IPO will be. It will carry other companies with significant investments along with itself and the largesse will be shared.

The breakdown of Alibaba’s ownership is Japan’s Softbank (37%), Yahoo (24%) and Alibaba’s founders and senior managers (13%). So to maximise profits from Alibaba, consider also investing in Yahoo, Softbank and others.

The writer is the chairman of Ace Securities

Published in The Express Tribune, June 16^th, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.