Promoting Pakistan’s Equity Market
With the global economic downturn, investment opportunities seem to have dried up for investors around the globe. The recession has spelt doom for not only small investors but large financial institutes have taken a hit as well. In the midst of this situation, Pakistan’s equity market represents a wonderful opportunity for foreign investors as it offers relatively better benefits.
The Karachi Stock Exchange has risen over 65% ever since the beginning of 2012 and has been one of the best performing markets in Asia; surpassing global stock markets, including India, China, Hong Kong, Tokyo, New York and London. Market segments that have showed outstanding performance include energy, food, textiles, spinning and cement. The extent of this tremendous growth can be
“During the period from January 24, 2013 to May 22, 2013, the KSE 100 index witnessed a rise of 4,550 points (27 percent). During this period the net foreign investment in the capital markets was $276 million. This shows that our markets carry significant attraction for foreign investors and carry a potential for long term growth. The market fundamentals such as price earnings ratios of our market are also lucrative as compared to peer jurisdictions thereby presenting an opportunity for profitable investments and healthy returns”
–Tahir Mahmood, Acting Chairman, SECP
seen in the table here. The reasons for this growth have been a number of conducive measures by the government which have helped in building investor confidence and increased the potential of earnings. Capital gains tax along with the demutualization of the stock exchange have been key enablers in instigating this rapid surge. Additionally, the cut in discount rate by the State Bank of Pakistan and a smooth transfer of power from one democratically elected government to another has also played a part in attracting investors to invest with confidence.
To apprise US investors of the potential of Pakistan’s equity market and address their fears over its volatility, the Fifth Annual Pakistan Investment Conference was co- curated by the Karachi Stock Exchange in partnership with Bloomberg LP and JS Bank in Omni Berkshire Place, New York. It was jointly sponsored by the Pakistani brokerage house, First Capital Equities and Auerbach Grayson of USA. The conference was attended by high net- worth individuals and managers of leading international investment funds in the US who were keen to explore the emerging market potential and wanted to understand its dynamics.
The COO of First Capital Equities Limited, Farooq Habib said: “In my opinion, the Pakistan equity market is one amongst very few markets around the world that is poised to advance on a long- term bull phase over the next several years.”
Eight major Pakistani companies, including DG Khan Cement, Engro Corporation, Engro Foods, Fatima Fertilizer, MCB Bank, Nishat Mills, OGDC and PPL attended the twoday conference and had one- on- one interactions with over 50 prospective security investment institutions.
The KSE chairman, Muneer Kamal expressed his satisfaction on the extraordinary performance of the Pakistani equity market in difficult global economic circumstances. He was confident that strong market fundamentals are driving the growth in the equity market and keen foreign investor interest is a clear sign that confidence in the country’s capital market has been revived.
On the other hand , KSE MD, Nadeem Naqvi spoke of the underlying drivers that have resulted in the strong performance of the equity market. He elaborated on the capital market regulatory regime, both at the SECP as well as the exchanges level, and underlined the focus on systematic risk management, post- demutualization and separation of regulatory and commercial functions of the exchanges to avoid conflict of interest and empowerment of investors to protect their interests. He went on to applaud the efforts of the stock exchanges to encourage greater participation in the equity market. Mr. Naqvi pointed out that Pakistan’s effective GDP was not $ 228 billion but close to $ 330 billion if the huge undocumented economy were taken into account. He expected the GDP to further rise towards $ 450 billion over the next three years. Mr. Naqvi also brought to light the inherent resources that lie in Pakistan, ranging from agriculture to minerals to strong traditional industries.
The conference also presented top Pakistani companies in major sectors such as banking, chemicals,