The Pakistan stock market gained eight percent (dollar-based 15 percent) in the quarter ended on Monday, making it the best performing market in the world.
In 2014YTD (year till date), MSCI Pakistan gained 6.3 percent, higher than 5.2 percent gain of MSCI Frontier Markets. Among Asian frontier markets categorized by MSCI, Pakistan ranked second, ahead of Sri Lanka and Bangladesh.
Analyst Vahaj Ahmed at Topline Securities said that improving economic indicators and foreign inflows generated positive sentiments in the market.
The strengthening of rupee against the dollar also assisted Pakistan market in securing a place ahead of the rest. In 2013, KSE-100 Index had gained 49 percent which compared favourably with last 10-year and 20-year average annual return of 28 percent and 22 percent, respectively.
Average daily volumes in cash market improved to 256 million shares during first quarter of 2014 compared to 211 million shares in the corresponding period last year.
Traded value stood at Rs 9.2 billion or $89 million as against Rs 5.7 billion or $58 million in the first quarter of 2013.
Foreign inflows also kept up the bullish trend at the market during the first quarter of 2014. Foreign investors hold $5.1 billion worth of Pakistan shares which amounts to 32 percent of free-float (8 percent of market cap). During the said quarter, foreigners net inflow stood at $36 million over $70 million net buying in first quarter of 2013.
Apart from increasing participation in secondary market, the local equity market witnessed healthy participation in initial public offering (IPO) during the first quarter of 2014.
In early 2013 the KSE started performing well and till date is performing well.
According to analysts when the biggest economies seem to be struggling, investors have looked to explore smaller markets to gain speedy returns, giving way to markets such as Mexico and the Philippines, but there are reasons why Pakistan has outperformed all three of them.
The first and foremost reason is the investor moratorium applied in January 2012 year by the Securities and Exchange Commission of Pakistan (SECP), in collaboration with the KSE it allows foreign investors to bring investments to Pakistan with no questions asked about the money’s origin and sources, allowing black money to make its way to the whitening mill, with the SECP’s will, another analyst said.
This passing of the amnesty not only brought foreign investment into KSE but also encouraged local owners of undocumented wealth to enter the formal economy and let that money revolve around the tax-man. This moratorium is to stay until June 2014, and has had an enormous effect on the KSE, more than doubling the daily average traded volume.
Here’s another huge reason why KSE has been rocking it out. The SECP allows anyone to own 100 percent shares in any company in Pakistan, not only that, but he can take out as much profit as he wants, as long as he pays taxes – all income after taxes is remittable outside Pakistan.
Owning 100 percent of foreign shares is a big deal, most countries don’t allow majority stakes, especially large developing countries like India, China, Brazil and Russia, making Pakistan’s markets more bankable.
All these winning hands and arms of the KSE machine form the best performing stock exchange in the world. Despite its market cap being a mere $52.7 billion and the country’s economy projected to grow only 3.6 percent last year, as compared to its competitor developing countries, KSE has invincibly risen more than 40 percent last year, showing it out to the world how magnetic it is to the dollar, despite the city’s worrying law and order situation.
By Moonis Ali, WEEKLY PULSE MAGAZINE, April 21, 2014