Pakistan beats India in market returns

New Delhi, March 21 | Updated: Mar 22 2005, 05:30am hrs
Indians might be beating Pakistan in cricket but on the bourses, Pakistani indices have stolen a march over Indian indices. Pakistans benchmark index, the Karachi Stock Exchange 100 (KSE100), has delivered 480% return since 2000, compared to 44% by the Sensex.

A booming economy, economic reforms and a big push to the privatisation process has seen the KSE100 soar 54% since the start of the year. This against a return of a mere 1.52% by the Sensex.

While the rise of Sensex has been fuelled by FII inflows ($3.9 billion in 2005 and $22.5 billion since 2001), portfolio investment in Pakistan has picked up only recently. According to State Bank of Pakistan data, while 2000-2004 saw net outflows of $177.6 million, 2005 has seen inflows of $91.9 million.

Most of the aid for the Afghanistan reconstruction process is being routed through Pakistan. The economy is booming and there is lots of liquidity in the system from the money pumped in by non-resident Pakistanis, says a fund manager.

The privatisation process has gathered momentum and the recent surge can be attributed to the Pakistan governments decision on Oil and Gas Development (OGDC), Pakistan Telecommunication (PTC) and Pakistan State Oil (PSO), adds another analyst.

OGDC (33.46%) and PTC (15.03%), whose combined weightage in KSE100 is 48.49%, account for 60% of the surge in recent times. While the former posted year-to-date returns of 229.7%, the latter delivered 143.7%. Pakistan recently announced that it has shortlisted 14 bidders for PTL and it would sell 5% in OGDC by June.

However, analysts aver that not too much should be read into the surge since KSE is a small stock exchange. The total market capitalisation of KSE amounts to around $42 billion, compared to $88 billion for just 30 stocks in the Sensex.

Besides, in the past week, after touching a historic high of 10,303 on March 15, KSE100 has seen a continuous slide. On Monday, the KSE fell 4% to close at 9097.92. If you believe cricket affects market sentiment, March 16 was the day when the Kolkata test commenced!