Investors are heading to Pakistan to benefit from a
newly-elected, business-friendly government that is rolling out a
programme to aid the struggling economy, a recently published Wall
Street Journal report said.
In its report on Friday, the American daily said the benchmark index
traded in the financial capital Karachi jumped 49.4% last year, ranking
among the world’s top performers. The report said the rally is also part of a broad move by money managers willing to take on high risks in frontier markets across the globe on hopes of juicy returns that beat traditional emerging markets. That bet paid off handsomely in 2013 with countries like Argentina, Venezuela and Vietnam, with histories of volatility and sudden declines, scoring big gains.
The report observed that the biggest catalyst in Pakistan was the election of the PML-N. It is the first time in the nation’s history that an elected government has handed over power to another, raising expectations of improved political stability.
Flows from foreign investors into Pakistan reached $283 million from the beginning of May, the month of the election, to the end of 2013, according to the National Clearing Company of Pakistan. Global investors have also snapped up Pakistani government bonds with yields, which move inversely to prices, falling to 7.54% recently from as high as 11.69% in April on the 10-year bond.
The clearance of almost $5 billion in circular debt, a long-term bailout loan of at least $6.6billion from the International Monetary Fund, and a far reaching privatisation programme which will include the national airline and electricity producers, are all factors the report cites.
All the moves were important given that the country is plagued by electricity shortages, while the oil and gas sector accounts for nearly a third of the benchmark index in Karachi. The largest company on the index, energy firm Oil and Gas Development Company (OGDCL) saw share prices grow 43.5% last year.
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