Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: nokomis who wrote (40969)	10/11/2001 11:17:13 AM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

On rumours of implosion in Pakistan,,,... the nonsense being spread..the facts are that Pakistan defied the bad media given to it for last few years and showed that it is country with professional institutions and the best ally in need..the facts are now being reflected in our markets.. we are hoping that a new chapter will be written.. After the Sep 11 attacks in USA the concerns regarding Pakistan centered on two main parameters: 1. Economic 2. Political Economic The main concern here was with regards to the fragile economic situation vis-à-vis the BOP, budget deficit, currency etc. The events of the last few days have clearly shown that if nothing else Pakistan may come out much stronger economically speaking from this crisis. The country has already received debt write offs (Canada writing off USD 300mn) and more are expected (total bilateral debt at USD 8-9bn out of which USA alone has USD 3bn <USA can follow Canada and write off debt>); debt rescheduling of Paris Club seems a forgone conclusion, the IMF funds are coming in and the country is to start talks on the PRGF which basically is longer term funding to the tune of USD 2-2.5bn at concessional rates etc. So you see things are improving economically for Pakistan at a much faster rate after the country wisely decided to side with the US on terrorism. Furthermore there is also some talk of the country getting preferential trade access and removal of trade quotas and restrictions; trade not aid is also the focus here. The decision of the US to target financial assets of terrorist has benefited Pakistan's currency as it has appreciated by roughly 5% in the last week to 10 days. The reason being that we have seen USD inflows coming back into the country as black money, drug money, Afghan money or whatever name you want to call flow back in as people panic and fear US action and investigation into their accounts. The govt. has no problems with US dollars coming back home; the currency remains firm, forex reserves improve, and every one is happy. Thus, as is clearly evident from the above the Sep 11 events have rather ironically become a economic positive for Pakistan. The entire world is tripping over each other to provide aid, help, money and what have you to make sure that Pakistan remains safe, secure, and firmly on their side. As far as the Pak govt. is concerned they are more than happy to oblige!! Political The biggest concern here was with regards to the reaction internally after USA attacks on Afghanistan. Concerns here centered on response from: 1. Army 2. Civil Law and order To tackle the Army issue we have seen the Chief Executive completely change the top brass of the Army. We now have a new DG ISI (the intelligence agency much responsible for executing the Afghan policy), a new Chief of General Staff and a new Vice Chief of Army Staff. The ex-army personnel shown the door were reportedly more conservative in their views and may have had a slightly fundamentalist approach. The new servicemen who have taken their place besides being more moderate and balanced in their views also bring fresh blood and new decision making approach to give a new and more realistic direction to the country's Afghan policy and other defence related issues. With one stroke Musharraf has changed the face of the Army from being slightly fundamentalist prone to a now more moderate and western feel; someone with whom the West can do business. Also, the changeover has been smooth and the new aspirants have taken charge of their new responsibilities. All in all, the Army is firmly behind the Chief Executive and his decisions and there appears little internal rift or concerns going forward. This is a big positive. There were some concerns that there might be a civil break down in Pakistan after attacks on Afghanistan and that we will see mass scale rioting, severe law and order problems etc. Well, to put it mildly, NOTHING DOING!! Yes, we have had problems of street protests, rallies, some rioting etc but this is nothing that has not happened in Pakistan before. In a country of 140mn people if the religiously bent leaders manage to bring out on the streets 50-70,000 people in total all over the country then in all honesty it's a joke. The country has seen worse. Having said that, the border towns like Quetta, Peshawer and the adjoining tribal areas near Afghanistan are tense with much more intense protests than other parts of the country but in all fairness this was and is expected. In fact, what we are seeing is much less than what we had initially expected them to be. And as the attacks linger on the intensity will reduce as people let off steam and become more "accustomed" to the new reality. As far as business centers in Karachi and Lahore are concerned there was fear on the first day of the attack but since then it is business as usual: people go out to have lunches and dinners, young couples still date, the sea side is still littered with people in the evenings, sectarian killings still pepper the week and the KESC continues to give black outs due to its inefficiency. If someone were to remove TVs and newspapers from the city then you can bet your last rupee that you cannot tell the difference b/w now and 6 months back. So where is the break down in civil law and order? It's not going to happen. Everything is well under control and manageable. Business as usual but we now have Western support to look forward to!! And the market.... With the economic and political scenario well under control we now have to take a view on the market. Is it a good time to enter the market? A short and simple answer is YES. After Sep 11 the market did take a beating of about 10-12% but since then has recovered roughly half of that. The main problem in the last few days was one large local institution having huge margin financed positions which ran into problems in a falling market. The State Bank of Pakistan and SECP had to intervene and get other investors (the large local nationalized banks) to buy off this local institution to save the market. This has happened and approximately USD 30mn worth of weak position has been taken over and delivery picked up by the nationalized banks. All in all the weak holding has been picked up and there are very few genuine seller at current rates. In fact, local institutions are buyers at market dips. To give you an idea the total badla or margin financing of weak holdings in the market was approximately USD 70mn around 4-5 months back; last Monday it was only USD 15mn!!! Where has this USD 55mn worth of stock gone? Picked up? Evaporated? Your guess is as good as ours. Thus, at current levels there are not many weak holders, not many genuine sellers and the negative war news is already factored into prices. Does this mean that the market is at good entry levels? Well, YES. BUY!! With politics well under control and manageable, the economy likely to get further IMF / WB / US support going forward, the current cheap market presents a good opportunity to go long and build positions in PTCL, Hubco, PSO, Fauji and MCB.