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Extreme investing? Think Pakistan

Posted by: Frederik Balfour on January 11, 2008

For investors with a really strong stomach for risk, [and possibly bloodshed], Merrill Lynch is touting the charms of the Karachi Stock Market. At a media briefing in Hong Kong on January 11, Mark Matthews, Merrill’s Chief Asia Strategist says Pakistan is his top pick among so called Frontier Markets that also include Vietnam, Bangladesh and Sri Lanka.

Matthews says Pakistan represents the “biggest information arbitrage,” which in its crudest terms, means that body bags are good for stock pickers. He reckons that the slew of bad news, [heart wrenching though it is] coming from Pakistan, is diverting people’s attention from the fact that the Pakistan economy is humming along nicely, with growth forecast to reach 7% this year, a repeat of 2007, and stocks yielding an average of 6% dividend yield. Karachi was up an impressive 40% last year, and would have closed even higher had it not been for the tragic assassination of former President Benazir Bhutto in December which trashed the market.

Reader Comments

Imran Hakro

January 17, 2008 12:27 AM

Referring to the Merrill Lynch Investment strategy on 01/14/2008 “Stocks we like include the following: United Bank Ltd (UBL), Pakistan State Oil (PSO), Pakistan Petroleum Ltd (PPL), Fauji Fertilizer Bin Qasim (FFBL), Hub Power Company (HUBC)”

In the past year, Pakistan has had:
1. Several dozen suicide bombings,
2. A court crisis with the Chief Justice,
3. The prime minister changed to a caretaker,
4. The assassination of Benazir Bhutto,
5. Ongoing issues with Al Qaeda,
6. An oil price at USD100, not a good thing for any net oil importer.
7. Gross NPLs at PRs166bn: Gross NPLs to Gross Advances at 6.5% (3Q07)

Something must be going on, more powerful than all that violence and unrest, something perhaps best evinced by the fact that in the past few months:

1. Nomura announced it would team up with an Omani bank to buy Saudi Pak Bank for USD160mn.
2. Barclay’s Bank received a banking license in Pakistan and will open up 10 branches with USD100mn.
3. International Petroleum Investment, a UAE company, announced it would build a USSD5bn refinery.
4. Hutchison Port Holdings announced it will build a USD1bn deep water container port.
5. Singapore’s Temasek, through NIB Bank, is buying PICIC.
6. Philip Morris is building a new plant, and China Mobile is hiring thousands of people, as it doubles its base stations in the country … in fact, this list could go on, and on.

The point is that while Pakistan’s geographic position is usually construed as a negative, positioned as it is next to Afghanistan. That is not something that can be changed, nor can the fact that there are extremists, in Pakistan as in other parts of the world, who will continue to be a thorn in its side. But let’s take a step back and look at the geographic location from a wider angle.

Pakistan will use its geographic position of the dynamic part of Asia over the next few decades to boost prosperity and economic growth. Pakistan will gain more access to Middle Eastern money and strengthen its connections with China.

Shabbir Mandvi

October 26, 2008 10:10 PM

The Destabilization of Pakistan
by Prof. Michel Chossudovsky
December 30, 2007


December 1, 2008 11:15 PM

The birth of the crude, iconoclastic XFL has generated widespread consternation in this country's otherwise refined society. Some Americans worry that the new league, with its unsophisticated cheerleaders, substandard announcers and Paleolithic fans, could hasten the decline of the staid, conservative, classy National Football League, represented by such paragons of virtue as Baltimore's Ray Lewis and Carolina's Rae Carruth.Traditionally the Securities & Exchange Commission has tried to ensure the stability and integrity of the financial markets through judicious regulation and the prosecution of swindlers and cheats. The Xtreme Exchange Commission will take a more laid back approach to securities fraud, viewing criminal activity as the result of youthful exuberance rather than a sociopathic mind set or a perfidious desire to line one's pockets.

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May 10, 2009 6:06 AM


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