Why Invest in Pakistan
The financial markets in Pakistan have shown rapid growth in the past decade comparative with global markets.
The tiny, exotic emerging market in South Asia is largely overlooked by mainstream analysts and investors in their quest for competitive returns. Foreign interest has remained low, and the local population too risk averse to invest high volumes in equities. As a result, equities have traded at consistently low price multiples, and stock prices exhibit market inefficiencies for extended periods of time. Prices can remain very low, or very high, long enough for investors to reap considerable gains.
It comes as no surprise that international investors are in the dark about the 584% (in US Dollar terms) rise in Pakistan’s premier stock market, the Karachi Stock Exchange (KSE), over the last decade (FY 01-11). Contrast this to the MSCI Emerging Markets Asia Index, from one of the top performing regions on the globe, which brought a total return of 233% over the same period. North America is the lowest performer, at only 14.4% over ten years.
The untapped potential for growth in this market is now turning heads in the world of investment management. The more courageous investors look to Pakistan to add some exotic flavor to their portfolios. The prudent ones look at the strong and stable fundamentals of entire sectors that are ripe with opportunity, be it financial services, telecom, consumer goods, or manufacturing industries.
To add to Pakistan’s growth story, the market for sovereign and debt securities, too, provides ample opportunity for fixed income investment. Interest rates in Pakistan remain amongst the highest in the world. The Central Bank has announced the discount rate at 12%, keeping it between 12-14% over the last several years. Interest rates in China, in comparison, are at 6.56%, in United Arab Emirates at 1%, and in the United States of America and United Kingdom at 0.25% and 0.5% respectively. Even Money Market investments in Pakistan manage to outperform several asset classes of longer-term investments in preferred locations around the world.