Hello Jay, Your Hub Power of Pakistan has just paid out its wopping dividend, and you are waiting for the next dividend announcement in February. Can you afford to wait?
markets.scmp.com
Friday, October 25, 2002
Karachi rallies as funds pour in from abroad
REUTERS in Karachi
There is risk of nuclear war, deadly attacks on foreigners are common, and it is a favourite hideout for terror group al Qaeda.
Welcome to the home of Asia's best performing stock market. Pakistan's bourse, located in the country's commercial capital Karachi, has shot up 70 per cent this year as markets around the world have been hitting new multi-year lows.
The secret behind the Karachi Stock Exchange's meteoric rise? A boost in remittances by Pakistanis who work abroad, a strengthening currency, and record-low interest rates.
"The market is the only place now where I can make money," said individual investor Abdul Jabbar. "I also used to invest in dollars but it has lost its charm. Now the stock market is the only source which gives me good returns."
The Karachi Exchange is one of the region's smallest with a capitalisation of just US$8 billion - less than one-tenth of the market value of Asia's most valuable stock, NTT DoCoMo. And the exchange, located off Karachi's main commercial drag, II Chundrigar Road, has a history of booms and busts.
The Karachi 100 Index hit a record high of 2,661.31 points in 1994, boosted by the investing craze in emerging markets.
One rookie portfolio manager, Landon Thomas of United States investment bank Morgan Stanley, helped the market boom when he pumped $200 million into the fledgling market, he described in a 1999 article in SmartMoney magazine.
The boom fizzled and the market hit a bottom at about 750 points - down 70 per cent from its high - in 1998, hurt by Asia's financial crisis and Pakistan carrying out tit-for-tat nuclear tests with India.
Foreign investors have been loath to buy into the latest boom, which has propelled the market to 2,175 points, less than 20 per cent off its record high. They sold $2.8 million worth of Pakistani stocks in the quarter to September 30, compared with net sales of $47.2 million in the year-ago period, according to central bank statistics.
"I personally think it's a missed opportunity because foreign investors had not realised that local investors would have that kind of liquidity to jack up the market," said Mohammad Sohail, research head at Investcap Securities.
The Karachi exchange has shown knee-jerk reactions to a series of bomb attacks on foreigners in Pakistan in recent months but it has managed to digest the bad news and recover. That is because domestic investors keep a cool head, brokers say.
"This trend of increased dominance of local investors in Pakistan is good in the sense that Pakistani markets are not very sensitive to any external event or crisis," another broker said. "Foreigners are very sensitive to such issues, causing huge swings in local equity prices."
Dollars have flooded into Pakistan in the form of aid inflows and remittances by expatriate Pakistanis following President Pervez Musharraf's decision to join the international coalition against terror after last year's September 11 attacks.
The Pakistani rupee has strengthened 8.2 per cent on the official interbank market to less than 59 to a dollar from a weak point of about 64.25 in mid-September last year, and would have risen further but for central-bank intervention.
Many investors, who used to invest in dollars, have turned their focus to the equity market because of the rupee's strength, brokers say. Record-low interest rates - just 3 per cent on savings accounts and 10 to 11 per cent on government savings schemes - also play a role.
"My clients keep telling me . . . we will not sell because if we sell then tell us a better place to invest," said Ashraf Zakaria, a broker at AHRL Securities. "They say banks and other saving instruments are not giving us the returns which we are getting in the market."
So is the bubble going to burst? Not if brokers can help it.
"We are bullish on the market," said Shuja Rizvi, head of institutional sales at IP Securities. "I see it touching up to 2,400 points because liquidity inflows are consistent and these inflows are not likely to dry up soon." |
