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ISLAMABAD: Investors should forget India and instead profit from the ‘quiet rise’ of Pakistan along with Sri Lanka and Bangladesh, Barron’s Asia said.
“Forget India. Investors looking for the next big thing should look to its South Asia neighbours instead — Pakistan, Bangladesh and Sri Lanka,” America’s financial magazine in an article said.
According to the article, the three countries with a combined 390 million people represent what Morgan Stanley chief global strategist Ruchir Sharma calls “the quiet rise of South Asia” as opposed to India which has been “flattered by spasms of hype for years”.
While overshadowed by their larger neighbour, the trio is enjoying fast-paced growth, embracing much needed reforms, and look set to enjoy a demographic dividend over the long term. “A substantially higher economic growth rate than in many other economies globally, coupled with fantastic demographics that will continue supporting growth for many years ahead,” East Capital fund manager Adrian Pop tells Barron’s Asia.
The article mentions that Pakistan is the flag-bearer of the positive changes taking place in the South Asian nations. Since coming to power five years ago, Prime Minister Nawaz Sharif has got inflation under control, cut the budget deficit and reined in the current account deficit. But more importantly, terrorism finally appears to be on the backfoot given more assertive action by the army. Chinese investment has also poured in: $50 billion will be spent on new roads, transport links and energy projects.
“More power capacity is key for Pakistan to move to an even higher economic growth rate,” says Pop. That will benefit stocks in materials and energy.In December, the Pakistan Stock Exchange sold 40 percent of itself to a consortium of Chinese investors.
The Karachi stock index is up by about 50 percent since the start of last year, propelled by index compiler MSCI’s decision to bump up the country to emerging markets status. That will bring in hundreds of millions of dollars from passive funds into the Pakistani benchmark. The rally in stocks has arguably left the market looking a little pricey as the KSE 100 index trades at over 12 times earnings, its heftiest valuation since late 2009. That’s still about a 15 percent discount to the MSCI emerging markets index, however, plus Pakistani stocks yield an attractive 4 percent-plus dividend.
Bangladesh benefits from a growing working age population and rising labour costs elsewhere in Asia. Garment manufacturing for Western clothing companies has increasingly moved from China to places like Bangladesh, where wages are lower.
The article said in August it tipped downstream firm Pakistan State Oil (PSO.PK), which has since risen 10 percent. It’s worth hanging onto that stock, but we’d add upstream exploration player Oil & Gas Development (OGDC) to the mix too.
Shares in the Islamabad-based company have powered up 45 percent in the last year, and could rise by a further 30 percent.Oil & Gas Development will benefit from any further recovery in oil prices, which have roughly doubled since hitting their nadir last February.
Earnings per share should rise by 17 percent in full-year 2017 and 20 percent in full-year 2018. Oil & Gas Development trades at eight times forward earnings, which is toward the higher end of its historical valuation. That multiple is more compelling than exploration peer Pakistan Petroleum (PPL), however, which trades at 10 times next 12 months’ earnings.
About Lahore’s DG Khan Cement (DGKC), which is one of the country’s largest cement producers, with a capacity of more than four million tons a year. The stock also makes a good foundation for a Pakistan portfolio.
At the end of December, the countries jointly announced a $14 billion dam project close to DG Khan’s HQ in northern Pakistan. The dam will need about a million tons of cement.
Shares in the company have returned a solid 50 percent over the last year. DG Khan’s valuations looks a bit less stretched than that of rival Lucky Cement (LUCKY), which investors were told to pour into their portfolio over summer.
DG Khan trades at 10 times forward earnings, compared to Lucky’s 16 times. Its dividend yield of 2.6% is also bigger than its rival. Brokers think DG Khan can rise by as much as 25 percent.
Lowest market P/E in the region with the highest return.
Upgradation of Moody’s rating of the country.
Pakistan is the 26th largest economy according to PPP (Purchasing Power Parity), and the sixth largest populous country in the world with a burgeoning middle class, having 54% of the population below the age of 24 years. In news, Pakistan has been presented as the turbulent nation embroiled in militancy and political violence. However, the landscape of the country has been changing since the past two years, with an improving macroeconomic situation, steady political outlook and substantial improvement in law and order, and the upgradation of its bond ratings from Caa1 to B3, a stable outlook.
On 9th June 2015, the MSCI stated about a potential reclassification of the MSCI Pakistan Index into Emerging Markets from the current classification of Frontier Markets in its 2016 Annual Market Classification review. This categorization would trigger a large flow of emerging market funds to return to Pakistan as the MSCI Emerging Market Index is tracked by global funds worth $1.7 trillion, according to Bloomberg.
Further, in one of the lectures at the Aga Khan University, the Chief Investment Strategist of Morgan Stanley said that Pakistan’s rise is just a matter of time. This was due to the favorable demographics and the lower P/E of the stocks – performing better in terms of return – when compared to the markets of the developed world.
The KSE 100 Index, which tracks the top 100 companies out of the 557 listed on the stock exchange had a five-year US dollar CAGR of 25% (highest among its peers) and net profit margins 60% above the five-year average of the peer group whose margins are 10.2% lower than its five-year average. The Bourse has an average ROE of 19.2% against the peer average of 10.2%.
Pakistani stocks are cheaper when compared to their regional peers. Consider the following graph for further details:
As the above graph illustrates, Pakistani stocks have a lower P/E, P/B and higher dividend yield relative to its peers.
Posted by Dr. Salman in " RIAZ THE SHAITAN OF PAKISTAN, Nawaz "Badami Lassi Kim Barker Thurke" Sharif, Nawaz Sharif & Kashmiri Biradari, Nawaz Sharif Dangerous Man, Nawaz Sharif Massive Corruption, NAWAZ SHARIF MUZZLES PRESS, NAWAZ SHARIF SAGA OF ABSOLUTE & CHRONIC CORRUPTION, NAWAZ SHARIF US & SAUDI AGENT, Nawaz Sharif US Agent, PAKISTAN AIR FORCE'S BIGGEST ENEMY NAWAZ SHARIF, Pakistan Army's Biggest Enemy Nawaz Sharif, PAKISTAN BILLION RUPEES LOAN DEFAULTER, PAKISTAN ENERGY FRAUD, PAKISTAN'S CORRUPT MEDIA on August 11th, 2013
Nawaz Sharif is back. And back with a big enough chunk of parliament that he won’t have to form a coalition government. After a record number of Pakistanis showed up at the polls and dumped the delinquent Pakistan People’s Party out of power, many Pakistanis have rejoiced with hope that their country is on the brink of a new period of prosperity.
We don’t want to rain on anyone’s parade but we don’t share that optimism. Not so long ago Nawaz Sharif wasn’t much more than a corrupt thief, like many of his colleagues in the Pakistani civilian political elite. He and his party have visible links to some very nasty groups of sectarian militants, especially in the Punjab, a PML-N stronghold. Pakistan’s deep state, where the real power lies, doesn’t seem likely to let Sharif do more with his time in office than take the blame for the government’s inevitable failures and economic setbacks.
Sharif will get blamed for all the potholes on Pakistan’s terrible streets, all the hours when the electricity isn’t running, all the schools that aren’t open and all the jobs that aren’t being created. And as ever, the parliamentary majority is for sale and doesn’t represent a coherent political force, except when it comes to fighting for spoils and graft.
Pakistan is on the brink of a new era but only in the sense that one group of corrupt politicians have been dumped out of office in exchange for another group of equally corrupt civilians. The country still faces the same problems it faced five years ago and will likely face five years from today.
This article was written before the Pakistan Election and is proving to be prophetic. Well done Russel Meade!
Posted by admin in BOOT THE SCOUNDRELS OR SHOWDAZ, BUNGLER NAWAZ SHARIF, Nawaz "Badami Lassi Kim Barker Thurke" Sharif, Nawaz Sharif & Kashmiri Biradari, Nawaz Sharif Massive Corruption, NAWAZ SHARIF US & SAUDI AGENT, Nawaz Sharif US Agent, Nawaz Sharif Womanizer, PAKISTAN BILLION RUPEES LOAN DEFAULTER, PAKISTAN'S CORRUPT MEDIA, PML (N) CORRUPTION, Punjab Held Hostage Sharif Bros on May 5th, 2013
LAHORE: The National Accountability Bureau (NAB) has decided in principle to revive all the corruption references pending against Nawaz Sharif, Shahbaz Sharif and other members of their family which had been adjourned indefinitely in December 2000 after the Sharifs signed an exile deal with the Musharraf regime and left Pakistan for Saudi Arabia.
According to well-informed NAB officials, of the three corruption references currently pending against Nawaz Sharif and his family members, NAB would first take up the case titled ‘State Vs Hudabiya Paper Mills (Pvt) Ltd’ in which nine members of the Sharif family are accused of committing money laundering to the tune of Rs642.743 million.
According to the NAB findings, the Sharif family members allegedly deposited ill-gotten money in fake accounts which were opened in other persons’ names and used the money from these accounts to pay off loans of the defaulting Sharif companies. Mian Muhammad Sharif, Nawaz Sharif, Shahbaz Sharif, Mian Abbas Sharif, Hussain Nawaz, Hamza Shahbaz, Mrs Shamim Akhtar (mother of Nawaz Sharif), Mrs Sabiha Abbas, Mrs Maryam Safdar (daughter of Nawaz Sharif) and the former finance minister of the Sharif cabinet, Ishaq Dar, are the main accused in the Hudabiya Paper Mills reference.
As per law, the NAB will have to file an application before the accountability court for reopening of the corruption references, which is set to open a Pandora’s box for the Sharif brothers, in view of a 43-page hand-written statement recorded by Senator Ishaq Dar and accusing the Sharifs of involvement in money laundering.
As per the statement which Ishaq Dar had recorded before a Lahore district magistrate on April 25, 2000, the Sharif brothers used the Hudaibya Paper Mills as cover for money laundering during the late 1990s. Dar’s statement was recorded as part of the Musharraf regime’s plans to file a money laundering reference against Nawaz Sharif and Shahbaz Sharif. However, the reference was shelved after the Sharif family opted for self exile in 2000, once they came to know that their trusted Ishaq Dar has turned approver against them.
Ishaq Dar’s confessional statement against the Sharif brothers was reportedly recorded before a district magistrate in Lahore, after he was brought to the court from a jail by Basharat Shahzad, then serving as assistant director in the Federal Investigation Agency (FIA).
NAB circles say Ishaq Dar’s deposition is an irrevocable statement because it had been recorded under section 164 of the Criminal Procedure Code (CrPC). Ishaq Dar now happens to be high-profile PML-N leader who has always been considered close to the Sharif brothers. Senator Ishaq Dar’s son, Ali Dar, is married to Nawaz Sharif’s daughter, Asma Nawaz.
Dar had confessed in his 43-page statement: “I opened two foreign currency accounts in the name of Sikandara Masood Qazi and Talat Masood Qazi with the foreign currency funds provided by the Sharif family in the Bank of America by signing as Sikandara Masood Qazi and Talat Masood Qazi. All instructions to the bank in the name of these two persons were signed by me under the orders of original depositors, namely Nawaz Sharif and Shahbaz Sharif. The foreign currency accounts of Nuzhat Gohar and Kashif Masood Qazi were opened in Bank of America by Naeem Mehmood under my instructions (based on the directives of the Sharifs) by signing the same as Nuzhat Gohar and Kashif Masood Qazi”.
According to Dar’s confessional statement, besides these foreign currency accounts, a previously opened foreign currency account of Saeed Ahmed, a former director of First Hajvari Modaraba Company and close friend of Dar, and of Mussa Ghani, the nephew of Dar’s wife, were also used to deposit huge foreign currency funds provided by the Sharif family to offer them as collateral to obtain different direct and indirect credit lines. Dar had further conceded that the Bank of America, Citibank, Atlas Investment Bank, Al Barka Bank and Al Towfeek Investment Bank were used under the directives of the Sharif family. Interestingly enough, Dar also implicated himself by confessing before the district magistrate that he – along with his friends Kamal Qureshi and Naeem Mehmood – had opened fake foreign currency accounts in different international banks.
The News made frantic efforts to approach Ishaq Dar and after making several phone calls the brief response received from Mr Dar stated: “This is all rubbish. The Hudabiya Paper Mills case is nothing but trash. The matter is sub judice in the High Court and facts would be known to public in due course. All transactions were duly reported to the State Bank of Pakistan as per law of the land”.
However, a senior PML-N leader, who spoke on condition of anonymity, said the credibility of a confessional statement recorded under pressure and coercion, and that too by the officials of a military regime, will always be doubtful and remain questionable.
Interior Minister Rehman Malik has already taken up the same money laundering case at a press conference in Islamabad on Saturday. Giving details about the scam, he said the Hudabiya Paper Mills Limited, owned by the Sharif family, entered into a leasing contract with M/s Al Towfeek Company for investment funds under the laws of the Cayman Islands on February 15, 1995 for lease of paper manufacturing machinery. The leasing price was $12.046 million. Rehman Malik said Shahbaz Sharif and Abbas Sharif and another, provided guarantee in writing to pay jointly and severally to the leasing company, all sums due against the Hudabiya Paper Mills under any agreement up to a maximum of $10 million with all profits and charges. On February 15, 1995, Shahbaz Sharif provided a further guarantee to pay on demand to the leasing company any such due against the Hudabiya Paper Mills up to a maximum of $12.046 million together with all profits and charges.
As the Hudabiya Paper Mills Limited failed to pay back the amount, M/s Al Towfeek Company served a demand on the Sharif family members on July 31, 1998 to repay the sum. However, all the three guarantors failed to honour their guarantees and to make payment on behalf of their company. Subsequently, on March 18, 1999, the High Court of Justice, Queens Bench Division (London) ordered the Sharifs to jointly pay a sum of $32.5 million (around Rs1.7 billion) to Al-Towfeek Company for Funds Ltd, the investment company from which they had taken a loan for Hudabiya Paper Mills Ltd. The London High Court passed the ex-parte order as the defendants – Hudabiya Paper Mills Ltd, Mian Mohammad Sharif, Shahbaz Sharif, and Abbas Sharif – had not defended themselves in the court.