Jump to content

Welcome to Tezi Mandee - Community Of Pakistani Investors & Traders
Register now to gain access to all of our features. Once registered and logged in, you will be able to create topics, post replies to existing threads, give reputation to your fellow members, get your own private messenger, post status updates, manage your profile and so much more. If you already have an account, login here - otherwise create an account for free today!

Welcome to Tezi Mandee - Community Of Pakistani Investors & Traders

Welcome to Tezi Mandee - Community Of Pakistani Investors & Traders, like most online communities you must register to view or post in our community, but don't worry this is a simple free process that requires minimal information for you to sign up. Be a part of Tezi Mandee - Community Of Pakistani Investors & Traders by signing in or creating an account.
  • Start new topics and reply to others
  • Get latest news on Karachi Stock Market
  • Subscribe to topics and forums to get automatic updates
  • Registered member get added in mailing list for mailing updates
  • Get your own profile and make new friends
  • Customize your experience here
  • Be the first to know the KSE latest announcements shared by our members
  • Registered members get access to Protected Forums and topics
  • Registration is free Create Account
  • If you are already a member just Sign in
To Create Account ( Click Here )
To Sign In ( Click Here )
 

Pakistan Market Outlook 2015

how market in 2013 expected to be

19 replies to this topic

#1
Mansoor

    CAPTAIN

  • Root Admin
  • 26,894 posts
  • Joined 09-January 08
  • Skin: Main Blue
  • Offline
    • Gender:Male
    • Country: Country Flag

    Current mood: Spaced
    Reputation: 8,228
    A strong bull run at the KSE has propelled the benchmark KSE‐100 Index upwards by 5,626 points (up
    50%) since Jan 1’12. A host of factors have aided this performance and the jury is still out regarding
    the sustainability of this rally (see our statistical perspective in the following section), in our view. We
    believe sustainability is very heavily dependent on arresting nascent Balance of Payment (BoP) risks
    and upon future political stability (general elections are expected to be held in 2QCY13) both of
    which may lead to volatility on the exchange. With regards to the former, sizable upcoming IMF
    repayments leading to reserve draw down risks (SBP reserves: US$8.9bn as of Dec 14’12) and
    consequent pressure on the currency (PkR is down ~8.1%CY12TD vs. US$) should lead to a weakened

    BoP profile if projected foreign inflows fail to materialize (3G auction: US$800mn; Etisalat payment:
    US$800mn; CSF: US$400mn‐US$600mn). Additionally, confrontation and conflict free general
    elections should lead to a higher degree of political stability. On the flip side, if the second
    consecutive democratic elections are marred by conflicts or are delayed, focus from the all important
    and much needed task of economic management may deter, leading to dented investor sentiments.
    The political equation in the run up to the general elections is therefore expected to play a key role in
    determining the direction of the market.

    Valuations remain attractive and we expect the benchmark KSE‐100 Index to return at least 15% by
    Dec’13 as Pakistan’s risk premium converges to historical levels. This would take the KSE‐100 Index to
    19,300 points by Dec 31’13. On fundamentals, the KSE‐100 Index trades at an attractive forward PER
    of 7.02x (43% discount against the region), offering an inflation adjusted ROE of ~12% (premium of
    26% against the region) and a forward dividend yield of ~8.0% (1.7x higher than the region). The
    earnings yield for the Pakistan Market is at 14% compared to the current weighted average of 1‐year
    T‐bill yield at 9.36%. Complete convergence to the mean multiple implies an upside of 30% as the
    market’s PER has averaged 9.28x in the last 10 years.


    Interestingly, PE based valuations are currently trading at approximately ‐0.50 standard deviations
    below the 5‐year historic average or 7.02x forward earnings. It is evident in the graph below, the
    CY12 bull run on the KSE‐100 Index has not completely reflected in fundamentals as PE based
    valuations seem to be trading in a band. In this regard, this relationship has been pretty stable since
    Oct'09, implying that the market is yet to completely re‐rate itself after the sharp decline witnessed
    in 2008. Statistically speaking, if the market were to break this band/stable relationship, then a
    justified PE of around 11x (last time the market traded close to its 5‐year historic average) would
    suggest that the current PE multiple is trading at a 35% discount to the justified PE multiple.


    Key plays for 2013: Considering the unfolding dynamics of the macro economy, we recommend
    investors to take a thematic approach to their stock market investment decision making. This
    includes: 1) defensive high dividend yielding stocks to counter any volatility in the market and 2) blue
    chips and cyclical stocks which have limited downside risks. In this regard, amongst financials our
    preferred bank is UBL while also like BAFL as a long term play and NBP due to its dividend yield
    charm. LUCK, DGKC and FCCL make the cut for our preferred scrips in the cement sector as the
    Jul‐01 Feb‐03 Sep‐04 Apr‐06 Nov‐07 Jun‐09 Jan‐11 Dec‐12


    current profitability momentum is expected to continue on the back of firm prices coupled with
    improvement in local demand. High dividend yielding fertilizers include FFC (less impacted by gas
    curtailment) and FATIMA (high cost efficiency and expansion focus). In the energy sector, we like PPL
    due to its aggressive expansion focus, while PSO makes the cut for the downstream sector. We also
    flag EFOODS (strategic tie‐ups with international companies should enable it to go ahead with its
    growth plans) and PTC (VSS benefits while ICH provides upside risk to estimates) as our top
    contrarian picks for the next year.


    Pakistan Market ‐ Is the rally sustainable? A statistical perspective.
    The benchmark KSE‐100 Index has gained 5,626 points (up 50%) to reach 16,908 points since Jan
    1’12. The bull run at the exchange leaves market capitalization of the benchmark Index at
    PkR4.2tn/US$43.54bn, up 43%/33% since the start of the year. Sentiments in CY12 have been
    rejuvenated by 1) clarity over modalities relating to the capital gains tax, 2) conditional amnesty

    regarding source of income, 3) subdued political noise (relative equilibrium between the
    government, judiciary and military), 4) robust corporate profitability and 5) relatively moderate CPI
    (Nov’12: 6.93%) coupled with cuts in the policy discount rate (DR) (down 250bps CY12TD). Whether
    this rally is sustainable is very heavily dependent on arresting economic headwinds arising from
    nascent Balance of Payment (BoP) risks and future political instability (general elections are expected
    to be held in 2QCY13) which together may lead to a correction/volatility on the exchange.


    Looking purely from a statistical perspective, the average sequential return for the March ending
    quarter has been ~9%QoQ in the last 20 years. Ignoring fat tails (low probability – high impact black
    swan events), the ‘Shajar Chance of Loss’ indicator should reach 10.28% at the end of 2QFY12
    (assuming the KSE‐100 Index closes the year at 17,000 points) – about the same level experienced in
    4QFY03. We have calculated this indicator using a normal distribution of rolling returns of the last
    four quarters of the KSE‐100 Index. This indicator has recently been on a downtrend due to robust
    sequential returns in the last few quarters. However, this is a lagging indicator and lower values
    result from realization of recent gains, while also hinting at possible market peaks as the ‘Shajar
    Chance of Loss’ indicator has a correlation of ~‐49% with sequential returns of the KSE‐100 Index.


    The forecasted indicator level of ~10% suggests a continuation of the rally in the market as average
    sequential returns for the March ending quarter have been ~12% once this indicator has dived below
    20% looking at a 20 year period (1992‐2012). The 5% VaR (Value at Risk) is estimated to reach 3% at the end of 2QFY13, the lowest in the last 33 quarters (1QFY05A‐2QFY13F). This also suggests that statistically worst case losses on the KSE‐100 Index have reduced substantially on a relative basis.

    Another method to measure stock market volatility is to calculate the standard deviations of historic
    periodic returns. The graph below plots the 250 day moving average (dMA) standard deviations
    (volatility) of logarithmic returns on the KSE‐100 Index against actual KSE‐100 Index returns since
    2005. The graph clearly reflects that there is more volatility on the KSE‐100 Index during downturns
    and vice versa. In 2012, volatility measured by standard deviations of the KSE‐100 Index returns is at
    the lowest since 2005. With volatility coming down, the ±2 standard deviation bands have also been
    narrowing. Additionally, the inverse relationship between the volatility of daily returns on the KSE‐
    100 Index and the level of the KSE‐100 Index also points to a continuation of the recent trend.


    Risk factors to our reversion to mean target
    • US Dollar strengthening significantly, leading to imported inflation and consequent pressure on
    the BoP. In this regard, historically, the KSE‐100 has tended to contract whenever the funding
    gap has enhanced and vice versa (see graph below).
    • Inflationary shock via oil / commodity prices forcing the central bank to tighten monetary policy.
    • Sudden fall in inward remittances inflating the current account deficit.
    • Adverse weather conditions that negatively impact agricultural growth & hence the economy.
    • Any major upset in the political equation relative to current expectations.
    **********


    Posted Image


    #2
    Mansoor

      CAPTAIN

    • Root Admin
    • 26,894 posts
    • Joined 09-January 08
  • Skin: Main Blue
  • Offline
    • Gender:Male
    • Country: Country Flag

    Current mood: Spaced
    Reputation: 8,228
    2012‐ What a year (index return of 49%)
    After witnessing lackluster activity in last two years, the mar‐
    ket came out with a bang to give a return of whopping 49%
    YoY, to close at an all time high level (on CY end basis). Exclud‐
    ing the CY09 KSE‐100 index return of 64% (post market
    freeze), this is best calendar year index return since 2005.
    POLITICS– Hung Parliament likely
    While opinions vary over who will win the next election, we
    believe that we are on track to witness a hung parliament
    which in our opinion is negative for the market and the econ‐
    omy in general. We are of this view because we feel that PML‐
    N will make substantial inroads in Punjab province at the ex‐
    pense of PML‐Q, whose candidates have already switched over
    to other parties. While in KP province again, the current ruling
    coalition partner ANP will lose ground to Imran Khan’ PTI, PML
    ‐N and religious parties. We expect PPP to more or less main‐
    tain its vote bank in Sindh (despite the political noise by Na‐
    tionalists) and other provinces. All said and done, we are of
    the view that current coalition will lose its majority in the next
    election, while PML‐N will also find it hard to find any mean‐
    ingful partner.

    ECONOMY– Entry in IMF program is imminent
    Foreign exchange reserve position needs IMF support: SBP’s
    reserve are at a multi year low and with heavy repayment due
    in CY13, entry in another IMF program is imminent. A new IMF
    program is likely to result in rescheduling of remaining loans
    and reduce the systematic outflows.

    Controlling fiscal deficit will be IMF’s top priority: Currently
    the fiscal deficit stands at 1.2% of GDP during 1QFY13, striving
    for a target of 4.7% of GDP. The fiscal deficit during the same
    period last year also stood at a meager 1.2% of GDP, but it
    ended up being much higher at the close of FY12. The current
    government has been unable to meet the fiscal deficit target
    during its entire term, and achieving of FY13 target looks diffi‐
    cult given the high spending being witnessed so far.

    2013– Stock market to remain volatile
    The market will in our view remain volatile and not provide a
    meaningful return in CY13, unless clarity appears on the politi‐
    cal/economic front. In a hung parliament like situation, strict
    conditions of IMF and interest cycle reversing back upwards,
    we feel that volumes will also remain subdued.
    **********


    Posted Image

    #3
    Mansoor

      CAPTAIN

    • Root Admin
    • 26,894 posts
    • Joined 09-January 08
  • Skin: Main Blue
  • Offline
    • Gender:Male
    • Country: Country Flag

    Current mood: Spaced
    Reputation: 8,228
    PAKISTAN MARKET REVIEW
    2012‐ What a year (index return of 49%)
    After witnessing lackluster activity in last two years, the market came out
    with a bang to give a return of whopping 49% YoY, to close at an all time
    high level (on CY end basis). Excluding the CY09 KSE‐100 index return of
    64% (post market freeze), this is the best calendar year index return since
    2005. Volumes in CY12 also improved substantially by 118% YoY, after
    remaining on the lower side during the last couple of years.

    Key triggers for index return: Resurgence of the market was mainly due
    to resolution on Capital Gains Tax front in the start of the year and decline
    in interest rates. Key policy rate has fallen by 250bps in CY12 (450bps
    since July 2011), resulting in improved corporate results from the lever‐
    aged sectors. Like prior years (before market freeze), CY12 saw increased
    participation in second and third tier stocks, as smaller cement and textile
    companies came out of losses, to report healthy profits. Unlike previous
    years however, speculative activity has been relatively less (little margin/
    leverage) due to which most of the upside can be attributed to funda‐
    mental change in sector dynamics.

    A close analysis of key indices volumes shows that KSE‐30 volumes as a
    percentage of KSE‐All‐Share volumes constituted a majority share in CY11,
    but since the start of CY12 it has declined to as low as 34% in 4QCY12.
    Again this is attributable to the resurgence witnessed in second and third
    tier scripts.

    Cement the star; Chemicals the laggard: During CY12, cement sector of‐
    fered the highest return among the key sectors due to 360 degree change
    in sector dynamics, wherein cement prices increased and coal prices
    eased, while decline in interest rates also helped the sector. Personal
    goods (textile stocks) were the second best performing sector. Stable cot‐
    ton prices, increased yarn demand from China and lower interest rates
    were the key positives going in its favor.

    Among the laggards, Chemical sector severely underperformed the mar‐
    ket mainly due to issues faced by the fertilizer sector. Though gas curtail‐
    ment was present in CY11 as well, the industry was able to counter the
    production loss by raising urea prices. This year however the double
    whammy (GIDC and higher quantum of imported urea) has led to re‐
    duced pricing power and subsequently margins have suffered. For Bank‐
    ing sector as well, CY12 was a dismal year as the sector was over‐
    whelmed by significant policy rate easing which resulted in decline on
    asset returns, while the decision of SBP to increase the minimum deposit
    rate added fuel to the fire, resulting in NIMs compression.


    Foreigners and Individual were the major buyers: Taking a look at mar‐
    ket participants activity, shows that foreigners after being the largest sell‐
    ers in CY11, turned out to be the largest buyers in CY12. Individuals were
    the second largest buyers in CY12 (CGT resolution). Mutual funds and
    companies were the main sellers during CY12.


    POLITICS– Hung Parliament likely
    While opinions vary over who will win the next election, we believe that
    we are on track to witness a hung parliament which in our opinion is
    negative for the market and the economy in general. We are of this view
    because we feel that PML‐N will make substantial inroads in Punjab prov‐
    ince at the expense of PML‐Q, whose candidates have already switched
    over to other parties. While in KP province again, the current ruling coali‐
    tion partner ANP will lose ground to Imran Khan’ PTI, PML‐N and religious
    parties.

    We expect PPP to more or less maintain its vote bank in Sindh (despite
    the political noise by Nationalists) and other provinces. While MQM will
    also likely keep its share intact, unless something dramatic occurs in Kara‐
    chi’s voter list verification process. All said and done, we are of the view
    that current coalition will lose its majority in the next election, while PML‐
    N will also find it hard to find any meaningful partner given the bitter rela‐
    tions which it shares with PTI, MQM and PML‐Q.

    Legislation/IMF negotiations to become difficult: In a scenario where you
    will have a wafer thin majority eventually (be it the current coalition or
    PML‐N lead setup), legislation will become extremely difficult. As Pakistan
    will enter into a new IMF program, the issue will remain over implement‐
    ing the economic reforms such as increasing tax base, reformed GST and
    containing fiscal deficit by cutting the subsidies etc. Some unpopular deci‐
    sions will need to be taken by the next government which will be harshly
    opposed by the masses and the opposition parties.

    Among the positives, we feel that since US and Pakistan’s relationship is
    improving so timely receipt of CSF and other economic aid should con‐
    tinue after hitting a low last year.

    Long shots which can change our view
    A couple of scenarios are being discussed which can change our forecast
    of a hung parliament, however there is a very slim chance of them materi‐
    alizing:
    1) Caretaker/Technocrat setup to remain for a couple of years: Recent
    entry of Dr. Qadri in the political spectrum and his demands for electoral
    reforms have given wind to the rumor of establishment wanting a techno‐
    crat government, which will likely stay for a couple of years. Though it
    remains to be seen if this pans out, but most of the political parties will
    likely oppose it vehemently. A credible technocrat team will be a wel‐
    come change for the stock market, but remains a long shot.

    2) PPP and PML‐N alliance: Again a long shot, but some are of the view
    that talks are being held between the two leading parties with the bless‐
    ing of US. Under the proposed setup President Zardari would continue in
    his current office while Nawaz Sharif will be elected Prime Minister. If
    such an alliance indeed emerges, it will be positive for the market, since it
    will have the needed majority to implement key reforms. How long the
    alliance actually lasts, remain a question mark.


    ECONOMY– Entry in IMF program is imminent
    Foreign exchange reserve position needs IMF support: The rupee’s
    downward slide has been aggravated especially in the 2QFY13 as heavy
    installments to IMF were paid, resulting in continues decline in forex
    reserves. Though current account deficit has remained relatively better
    during FY13TD (higher remittance and receipt of CSF), capital and finan‐
    cial account has turned negative due to declining FDI and inability of the
    government to raise any debt from the international markets/donor
    agencies, while repayment to IMF has started.

    SBP’s reserve are at a multi year low and with heavy repayment due in
    CY13, entry in another IMF program is imminent. A new IMF program is
    likely to result in rescheduling of remaining loans and reduce the sys‐
    tematic outflows. In the medium term, the much needed USD inflows
    can come from 3G license auction and revival of privatization program
    which has remained dormant under this government.

    Pakistan has structural issues when it comes to the trade deficit, which
    will likely continue in the future. Conducive policies that encourage FDI
    and remittances are needed. Government should ideally tap foreign
    donors for financing mega projects like dams or Thar coal projects that
    will help revive economic growth through cheaper electricity.

    Controlling fiscal deficit will be IMF’s top priority: Currently the fiscal
    deficit stands at 1.2% of GDP during 1QFY13, striving for a target of
    4.7% of GDP. The fiscal deficit during the same period last year also
    stood at a meager 1.2% of GDP, but it ended up being much higher at
    the close of FY12. The current government has been unable to meet the
    fiscal deficit target during its entire term, and achieving of FY13 target
    looks difficult given the high spending being witnessed so far. Moreover
    tax/GDP ratio in Pakistan is lowest in the region, and FBR seems unable/
    unwilling to go after tax evaders so far. In order to curtail the fiscal gap,
    tough measures need to be taken, like reducing subsidies to loss making
    public sector entities and the power sector, along with making actual
    reforms to increase tax base, which will be IMF’s top priority.

    Low CPI is the only thing going in the government’s favor: From hitting
    its CY12 peak in May, CPI has decreased by 537 bps to a multi year low
    in Nov’12. Core inflation also declined to 9.7% during Nov’12, coming
    into single digits for the first time during FY13. The lower trend in infla‐
    tion could break going forward, as SBP continues to print currency for
    liquidity injections and deficit financing. The current high YoY growth in
    broad money of 17.8% provides evidence of higher inflation going for‐
    ward. Rupee weakening will results in higher priced imports, which
    could further increase the headline inflation. The gap observed between
    the core inflation (long‐term indicator) of inflation and CPI further reit‐
    erates our view of higher CPI in the future.
    **********


    Posted Image

    #4
    Mansoor

      CAPTAIN

    • Root Admin
    • 26,894 posts
    • Joined 09-January 08
  • Skin: Main Blue
  • Offline
    • Gender:Male
    • Country: Country Flag

    Current mood: Spaced
    Reputation: 8,228
    2013– Stock market to remain volatile
    While others may be of the view that the index will maintain its upward
    trajectory in CY13 (we wish that is the case as well), however ground
    realities make us feel otherwise. The market will in our view remain
    volatile and not provide a meaningful return in CY13, unless clarity ap‐
    pears on the political/economic front. In a hung parliament like situa‐
    tion, strict conditions of IMF and interest cycle reversing back upwards,
    we feel that volumes will also remain subdued.

    Positive triggers needed to sustain the rally: To look back at why we
    feel that this will be the case, one has to just look at who the key buyers
    were in CY12. Individuals were in forefront after the resolution of CGT
    issue, however we don’t foresee any reason for further enthusiasm in
    CY13 on that front. Foreigners were the biggest buyers in CY12 after
    being the biggest sellers in CY11. Its safe to assume that predicting for‐
    eigners movement is difficult, while a falling rupee should rationally
    lead to foreign outflow in CY13. We don’t foresee any major interest
    coming from key participants in CY13, except from Banks/DFI whose
    allocation towards equities is likely to increase in early CY13, until inter‐
    est rate cycle reverses.

    Corporate earnings growth is expected to remain in double digits and
    the market is trading at an attractive P/E of around 7x, but the issue
    remains whether the market will rerate upwards or downwards. We
    feel that apart from earnings growth, the market will need additional
    triggers, if it is to move up further from the all time high level.
    Plan your sector allocation in light of IMF program
    Though we feel that the market will remain volatile in CY13, sector wise
    outperformance/underperformance will nonetheless remain. One
    should plan allocation under the assumption of which sector/stock will
    benefit/lose the most in light of IMF program:
    Banking sector which experienced NIM shrinkage in CY12 due to declin‐
    ing interest rates, is likely to benefit the most out of expected yields
    reversal in 2HCY13. Moreover a lot of banks have unrealized gains
    which we feel they will book in 1HCY13, so earnings is likely to remain
    lofty.

    Fertilizer sector’s pricing power reduced substantially in CY12 due to a
    higher quantum of imported urea. We feel that strict conditions from
    IMF over the fiscal deficit will reduce the imported quantity as well as
    the subsidy given to these imports, and give pricing power back in the
    hands of local manufactures. We reiterate our theme of betting on
    those manufacturers who enjoy stable production.

    PSO and the energy chain in general has been plagued by the circular.
    Though it may take some time, but in case the circular debt is resolved
    the whole energy chain’s value can be unlocked, especially PSO which is
    trading at trough valuations.


    Auto/tractor sector which is witnessing positive news flow (imported
    car age limit reduction/tractor schemes) is likely to witness some sales
    volumes issues in 2HCY13. Both Cement and Auto sectors are expected
    to post healthy earnings numbers in 1HCY13 nonetheless.
    Cement sector which is enjoying robust local sales growth may witness
    issues after possible PSDP cut from 2HCY13 onwards.
    **********


    Posted Image

    #5
    KNShaikh

      News Desk

    • TEAM
    • 1,205 posts
    • Joined 02-April 12
  • Skin: Main Blue
  • Offline
    • Gender:Male
    • Country: Country Flag

    Current mood: Amazed
    Reputation: 393
    Where's the Limit? Will the KSE break the 20,000 barrier in 2013

    After a blow-out year in 2012, with the benchmark KSE-100 index rising 49%, can investors expect the index to breach the 20,000-point mark in 2013? Most stock market analysts are reluctant to say so explicitly, though their forecasts suggest that the market may, at least, get close.

    One of the more optimistic forecasts is by Syed Rehan Ali, a technical research analyst at Foundation Securities, who predicts that the stock market may hit the 19,700 level by the end of calendar year 2013 – though he hastens to add that there is likely to be plenty of volatility in the earlier half of the year, when the index may actually slide back to the 15,700 level.

    The 20,000-point barrier may sound dizzyingly high, but it is only about 18.3% higher than the closing level of 2012. Given the fact that the market’s 10-year average return is 21.2%, the KSE-100 index would only need to have a below average year in order to breach that important psychological barrier.
    But it is not just the technical factors that favour a continued rise in the equity markets. Fundamental factors also favour another profitable year for equity market investors. Two main factors are likely to drive growth: a continued resilience in corporate earnings, and an increasing likelihood of foreign investor attention.
    Corporate earnings have grown remarkably strongly over the past couple of years. In 2011, the last year for which complete data is available, net incomes for all companies listed on the Karachi Stock Exchange increased by 27.3%, according to data released by the State Bank of Pakistan. The corresponding figure for 2012 is likely to be in a similar range, judging by preliminary data.

    For 2013, the outlook for key sectors appears strong. The devaluation of the rupee is likely to help revenue growth at companies in the energy sector as well as textile exporters, according to BMA Capital, an investment bank. Given high levels of operational leverage, even a slight increase in revenues is likely to result in a substantial increase in profits for most of these companies.

    Another factor at play is election spending, which is likely to drive growth in cement sector stocks as the government spends more money on infrastructure projects in the run-up to the polls. This growth may be cyclical, but it is likely to benefit the economy nonetheless.
    Secular factors – such as the rising purchasing power of the middle class – are also at play and are likely to cause a renewed interest in food and consumer goods companies, particularly from foreign investors.

    Another factor at play in this sector is likely to be the more than $335 million that investors will be looking to redeploy in the food and consumer goods sector after they receive their payouts from Unilever Pakistan, which is looking to de-list from the Karachi Stock Exchange.
    And then there is the expected interest from foreign investors, who have struggled for returns in both their own home markets as well as more established emerging markets. In 2013, at least some of them are likely to turn their attention towards frontier economies like Pakistan, which means that valuations for Pakistani stocks are likely to rise.

    According to Raza Jafri, a research analyst at AKD Securities, the Pakistani equity market is currently trading at 7.2 times expected 2013 earnings. This is not only below regional markets but also below even Pakistan’s own historical levels. Add in an expected dividend yield of 7.6% and Pakistani stocks will suddenly start to look very attractive indeed, even to foreign investors who have hitherto remained skittish. That increased demand, in turn, is likely to turn into a self-fulfilling prophecy of higher returns.

    Published in The Express Tribune, January 7th, 2013.

    #6
    KNShaikh

      News Desk

    • TEAM
    • 1,205 posts
    • Joined 02-April 12
  • Skin: Main Blue
  • Offline
    • Gender:Male
    • Country: Country Flag

    Current mood: Amazed
    Reputation: 393
    Pakistan’s economy faces challenges in election year

    Javed Rana (Dateline Islamabad) / 7 January 2013

    This year is likely to see three governments in Pakistan. The ruling Pakistan Peoples Party still have few months to go followed by a caretaker set up for three months. A new elected government is likely to be in place after the national elections, which are expected in May.


    Until then the higher probability is that the governments one after the other would suffer from policy inaction at a time when Pakistan’s economy needs to grow at least seven per cent to absorb the 2.2 million labour force annually.

    The economy, which is in shamble due to various reasons, faces many challenges in 2013. The foreign exchange reserves have nosedived to $8.6 billion from $14.8 billion from last year. The trade deficit is widening and it is unlikely to bridge this gap in current fiscal year amid considering the closure of industry and unprecedented energy crises.

    Pakistani rupees has depreciated to record 40 per cent during last four and half years and many economists fear, it may further devalue to 15 to 20 per cent this year if corrective economic policy measures are not put in place immediately. The real inflation hovers in double digit while the official figure of 7.90 per cent seems not entirely free of manipulations.

    The government’s economic policies has bought the GDP growth to the lowest ever from 5.47 per cent in 2008 to 2.62 per cent in 2013.

    Dr Ashfaq Ahmed, who was a key player in running Pakistan’s economy during the regime of General Pervez Musharraf until 2008, believes that the economy is unlikely to grow beyond three per cent of the GDP this year. “The investment to GDP ratio would further decline, industrial growth is likely to remain flat and Pakistan would not be able to service its external debt obligations,” he predicts.

    The investment is shrinking. Even the telecom sector, which is the most stable financially, has transferred abroad $270 million due to inconsistent economic policies. Official figure indicates that Pakistan economy suffers near $70 billion losses due to country’s alliance in so-called war on terror.
    Energy crisis

    The biggest reasons of economy failing to turn around is the unprecedented energy crises. The government has shutdown altogether the gas supply for all kind of industries throughout Punjab, the biggest Pakistani province, which houses 75 per cent of textile units.

    The most of the industries particularly the textile units have been virtually closed down. Other 40 per cent textile industrial units have shifted to Bangladesh. Hundreds of thousands of low-paid labourer have become jobless. As many as 3,500 compressed natural gas (CNG) stations are being closed down in a systematic manner, which means there would be no fuel for 3.5 million public and private vehicles.

    The current gas supply is four billion cubic feet per day against the requirement of 6.5 billion cubic feet — a shortfall of around 2.5 billion cubic feet.
    The economists believe that at least 70 per cent of electricity crisis in Pakistan is because of non-payment to private power producers, who produced around 65 per cent of electricity with imported furnace oil.

    The agricultural sector like other wheels of economy suffered enormously. The excessive power breakdown led to frequent closure of the tubewells in central Pakistan in the last summer. It has heavily affected the growth of rice crop, one of the key agricultural input, the country has been relying on for export to meet direly needed foreign currency reserves. Therefore, Pakistan’s export target are unlikely to be achieved.

    The government is rushing with a legislation to provide blanket amnesty to the black economy. The only condition is if any one living inside or outside Pakistan pays just three per cent of his ill-gotten money above $50,000 within three months. The government is under fire from the opposition parties for attempting to provide legal cover to the smugglers, criminals and other corrupt elements within and without government. However, many MPs across the party divide in the parliament believe that the decision may be too late, but is a positive move and would help to expand the tax base in Pakistan.

    The government badly needs around $1.2 billion to make up the shortfall of annual tax collection target of around $8 billion. Hardly 0.8 million people pay taxes. The tax evasion is virtually an acceptable culture in Pakistan primarily because of strong public perception that the tax money end up in corrupt hands.

    About 300 among 443 MPs of the Lower and the Upper House of the Parliament simply do not pay taxes while they make all kind of legislation on country’s taxation. After failure to get tax from people, the ruling party resorted to heavy borrowings — $20 billion from international donors and $41 billion (Rs4 trillion) from domestic banks. The borrowing is more than the entire internal and external debt that successive governments in the past obtained since the country came into being in 1947.

    The government pleads its case by pointing out that during last four and half year the average deficit has been 6.12 per cent of GDP partially because the economy had to absorb ill-effects of war on terror. Prime Minister Raja Pervez Ashraf has his reasons to claims that the ruling party undertook the biggest ever development work in the history of Pakistan, but one finds it difficult to see the evidence of his claim on the ground.






    Karachi Stock Exchange (KSE) Daily Reports


    Top Pakistani Sites        Haroof Top Sites    Promoted at Global Promote

    Indemnity, Disclaimer & Disclosure Notice:
    • By visiting TeziMandee.com you indicate your acceptance of our Forum Rules Disclaimer & Disclosure and indemnify TeziMandee.com, its associates and related parties of all claims howsoever resulting from the usage of the forum.
    Disclaimer: Trading or investing in stocks & commodities is a high risk activity. Any action you choose to take in the markets is totally your own responsibility. TeziMandee.com will not be liable for any, direct or indirect, consequential or incidental damages or loss arising out of the use of this information.
    Disclosure: The information in this forum is neither an offer to sell nor solicitation to buy any of the securities mentioned herein. The writers may or may not be trading in the securities mentioned.
    • All names or products mentioned are trademarks or registered trademarks of their respective owners.

    Copyright © 2006 - 2012, TeziMandee.com All Rights Reserved.
    eXTReMe Tracker