Multi-Year Bull Market in Pakistan?

Elliot Wave theorist Mark Galasiewski is forecasting continuation of multi-year bull market in Pakistan. This forecasts marks an unusual agreement of  a technical analyst with fundamental research done by  Jim O'Neill of Goldman Sachs who recently  reiterated Pakistan's place on its growth map

 The Elliott Wave Theory, formulated in 1939 by Ralph Nelson Elliot,  is the basis of technical analysis that some traders use to analyze financial market cycles and forecast market trends by identifying extremes in investor psychology, highs and lows in prices, and other collective factors.

Here are some excepts of a recent interview of Elliot Theorist Mark Galasiewski on what he calls the "Indian Ocean Renaissance":

".... there are various ways to make long-term investment decisions. For example, Warren Buffett has shown that picking individual stocks can provide good returns over time. But it's a very labor-intensive and time-consuming process, to research companies thoroughly enough to have the kind of conviction that he does. And his “buy and hold” strategy means that he suffers significant drawdowns in his portfolio at times -- like during the 2007-2009 crash.

Elliott wave analysis gives you the opportunity to make long-term bets with a similar conviction -- but with a fraction of the elbow grease. Instead of pouring over hundreds of quarterly reports and legal documents, you look for Elliott wave patterns in the charts of market indexes. Those patterns reflect investors' collective bias, bullish or bearish. (I won't go into details of why this is so; our Club EWI has tons of free reports explaining the mechanics of the Elliott Wave Principle.)

So, knowing what part of the Elliott wave pattern your market is in, you know how the pattern should progress from there, ideally. And that gives you a probabilistic forecast for the trend. It doesn't work 100% of the time (what does), but our subscribers remember more than one successful forecast we've made using Elliott waves.

For example, on March 23, 2009 -- at the time when almost no one felt bullish -- we issued a special report to our subscribers forecasting a multi-year bull market in Indian stocks. Two weeks later, we identified three more markets in the region -- Pakistan, Sri Lanka, and Indonesia -- that we believed were also likely to enjoy an "Indian Ocean Renaissance."

India, Pakistan, Sri Lanka, Indonesia have all since generated some of the best returns among global stock markets. Without knowledge of the Elliott Wave Principle, it would have been difficult to forecast the boom -- especially given the dismal news events at the time. Do you remember the headlines in early 2009?

The world was engulfed by the global financial crisis, and most people believed the worst was still ahead. The currencies of India, Pakistan, Sri Lanka, and Indonesia had collapsed. Pakistan and India were on the brink of conflict over the Mumbai terrorist attacks of late 2008. A civil war was still raging in Sri Lanka. Who would turn bullish on stock under those "fundamental" conditions? We did, and only because Elliott wave patterns in the price charts of those four markets told us to "buy."

And by the way, the terrible conditions in India, Pakistan and Sri Lanka mostly reversed along with the market rally over the next year."

"The Wave Principle is how the market works. Financial markets are non-rational and counter-intuitive. Investing according to conventional assumptions eventually leads to financial ruin, since the market too often does the opposite of what most people expect.

Even thinking contrarily is insufficient, because sometimes it’s necessary to run with the herd. But Elliott wave analysis helps you to determine which psychological stance is most appropriate at any given time. Often, the news at the time would be suggesting you do the opposite". 

These latest analyses remind me of what Reuters' Mark Bendeich  wrote on June 10, 2008:

"A little more than six years ago, immediately after the Sept. 11 attacks on U.S. cities, few sane investment advisers would have recommended Pakistani stocks. They should have. Their clients could have made a fortune. Since 2001, the nuclear-armed South Asian country, blamed for spawning generations of Islamic militants and threatening global security, has been making millionaires like newly minted coins. As Western governments have fretted about Pakistan's nuclear weapons falling into the hands of militants, the Karachi Stock Exchange's main share index has risen more than 10-fold."

 Related Links:

Haq's Musings

Pakistan on Goldman Sachs' Growth Map

Pakistan's 64 Years of Independence

Goldman Sachs & Franlin-Templeton Bullish on Pakistan

Emerging Market Expert Investing in Pakistan

Pakistan's Demographic Dividend

Genomics & Biotech Advances in Pakistan

The Growth Map by Jim O'Neill

Pakistan Rolls Out 50Mbps Broadband Service

More Pakistan Students Studying Abroad

Inquiry Based Learning in Pakistan

Mobile Internet in South Asia

Online Courses at Top International Universities


Riaz Haq said…
Here is a News report on foreign buying pushing shares to four year highs in Karachi:

The Karachi Stock Exchange’s benchmark 100-share index rose 2 percent on Thursday to close at a four-year high as strong foreign buying encouraged local investors to take new positions in key stocks, dealers said.

“Healthy foreign buying buoyed market sentiment,” said Ovais Ahsan, head of equity sales at Optimus Capital Management. Foreign investors bought shares worth $13 million in Thursday’s and Wednesday’s sessions.

The benchmark 100-share index increased by 277.40 points, or 1.96 percent, to close at a 48-month high of 14,419.92 points – the level last seen on May 15, 2008. The index closed just 34.58 points lower than the intra-day high of 14,454.50 points. The KSE 30-share index surged by 211.79 points, or 1.71 percent, to 12,578.11 points.

Out of total 389 companies’ shares traded, 247 advanced, 90 declined, while 52 closed unchanged.

Stocks which played a leading role in driving the 100-share index up included Pakistan Telecommunication Company Limited (PTCL), Oil and Gas Development Company Ltd. (OGDCL), MCB Bank, Allied Bank Limited, Habib Bank Limited, Standard Chartered Bank Limited and Unilever Pakistan. Other notable stocks included Lotte PakPTA, Fatima Fertilizer Company, National Bank of Pakistan, Lucky Cement, Engro Foods, Faysal Bank and Nestle Pakistan.

Ahsan said that foreigners were taking fresh positions as Pakistani markets remain cheaper in the region. Moreover, foreign investors were expecting a positive outcome from ongoing talks between Pakistan and the United States over new terms of engagement on war on terror.

He said that fertiliser stocks remained hot for investors on reports that the government might buy 0.3 million ton of urea from local manufacturers instead of importing the same quantity to maintain its strategic reserves.

Samar Iqbal, an equity dealer at Topline Securities, said that heavyweight OGDCL remained in the limelight and gained Rs3 on reports that the government was expected to increase wellhead price of Qadirpur field.

Ahmed Rauf, a trader on foreign desk of JS Global Capital, said that many of the investors were bringing in their money into Pakistan since the government allowed them to invest in shares without disclosing their source of investment till June 2014.

He added that foreigners were acquiring stocks in fertiliser, banking, cement and oil sectors. “Yesterday, they were seen buying stocks including Fatima Fertilizer Company, PTCL, Engro Corporation, Lucky Cement, DG Khan Cement and Karachi Electric Supply Company.”

Turnover improved to 293.97 million shares from 246.39 million shares traded in the previous session. Turnover in futures market enhanced to 16.70 million shares from 11.87 million shares traded a day earlier.

Market capitalisation rose by Rs68 billion to Rs3,683 billion.

PTCL was the turnover leader with 26.41 million shares as it closed at Rs14.42 with one-day maximum allowed increase of Re1. It was followed by Lotte PakPTA with 22.76 million shares turnover as it closed at Rs9.32 with an increase of 78 paisas. DG Khan Cement was on third position with 22.76 million shares turnover as it closed at Rs43.41 with a surge of Rs1.57.
Riaz Haq said…
Here's a Reuters' report on KSE's record close on May 4, 2012:

May 4 (Reuters) - Continued buying by foreign investors and expectations of strong corporate performance by heavily-weighted companies boosted local confidence in the Karachi Stock Exchange, analysts said, leading it to close at its highest level since May 2008.

Foreign investors bought shares worth a net $19,569,904 on Friday according to the National Clearing Company of Pakistan.

The Karachi Stock Exchange (KSE) benchmark 100-share index closed 1.33 percent, or 192.36 points, higher at 14612.28 points, with a volume of 240.9 million shares. The market hit an intra-day high of 14,628.96, and posted its highest close since May 5, 2008 when the index closed at 14,673.13.

"The expectation of good corporate earnings and consistent buying by foreign investors combined to keep the market bullish," said Atif Zafar, a research analyst at the JS Global financial services company.

Among the heavyweights, Pakistan Telecommunication Company closed 6.93 percent higher at 15.42 rupees.

In the currency market, the Pakistani rupee closed almost flat at 90.76/78 to the dollar, compared with Thursday's close of 90.72/77. The rupee has been supported by remittances, which rose 21.45 percent to $9.73 billion in the first nine months of the 2011/12 fiscal year, compared with $8.02 billion in the same period last year.

In March, remittances totaled $1.14 billion.
Riaz Haq said…
Karachi's KSE-100 is the 3rd fastest growing index so far this year, according to London's Telegraph:

Egyptian stocks suffered last year amid the turmoil that followed the toppling of its president. But 2012 has signalled a recovery in their fortunes, notwithstanding a recent wobble on concerns that a dispute between the interim government and parliament threatened to derail talks on a loan from the International Monetary Fund, yet to be secure
In calmer times, it is economics rather than politics that will drive share price performance, of course. In second place, Vietnam’s benchmark Ho Chi Minh Index seems to have broken its downward trend, up more than 35pc so far.

What was last year one of the worst Asian performers certainly had room for a bounce back. The index plunged in 2011 on worries that tight monetary policy to fight double-digit inflation would hurt economic growth and corporate earnings. Inflation has since been slowing however, and the market has picked up.

Vietnam is seen as a “frontier” market, one of those economies which are smaller than developing or emerging markets and offer a worse environment for business and in terms of corruption.
The third biggest riser so far this year has been Pakistan’s benchmark Karachi 100, which this week reached its highest level in four years.

Figures showed that offshore investors increased their holdings of local stocks. “There are a number of foreign investors increasing positions in Pakistani shares and locals are following,” Ahmed Rauf, a trader at JS Global Capital, told Bloomberg.
1 EGX 30, Egypt UP 36.1pc

2 Ho Chi Minh, Vietnam UP 35.5pc

3 Karachi 100, Pakistan UP 28.8pc

4 Bucharest BET, RomaniaUP 23.8pc

5 OMX Tallinn, EstoniaUP 19.2pc Box light

1 General Market, Cyprus DOWN 24.7pc

2 Ibex 35, Spain DOWN 19.7pc

3 Colombo All-Share, Sri Lanka DOWN 11.5pc

4 Merval, Argentina DOWN 10.5pc

5 FTSE Mib, Italy DOWN 7.8pc
Riaz Haq said…
Here's an ET report on Avari's hotel expansion in secondary cities in Pakistan:

Avari Group has decided to develop Avari Xpress three- and four-star residences and boutique hotels in secondary cities of Pakistan on a lease basis.

Avari Group Chairman Byram D Avari while talking to journalists on the sidelines of a press briefing on Thursday informed that two such properties already exist in Islamabad. “We’ll have two more Avari Xpress properties in Lahore soon,” he said, adding that the group also planned to have similar properties in Faisalabad, Gujranwala, Multan and Sialkot.

The Avari properties provide all room amenities that are provided by their larger counterparts, including gym, restaurant and meeting facilities. However, they are limited in the food service and without a swimming pool and banquet facilities. Avari noted that Hyderabad did not apparently have enough demand to justify the establishment of a full-fledged Avari hotel there. However, he said he wanted to set up a three-star in Hyderabad. He added that Sukkur seemed more feasible for a four-star Avari hotel..
Riaz Haq said…
Here's Daily Times on rising domestic sales of cement in Pakistan:

The cement sales in domestic market posted fifth straight month of increase as compared to last year but the industry is still passing through difficult times as its exports registered third consecutive month of decline.

A spokesman of All Pakistan Cement Manufacturers Association stated this while discussing performance of the cement industry during first 10 months of the current fiscal.

He said that the total cement despatches up till April 2012 were 26.643 million tonnes, which is 3.31 percent higher than despatches during the corresponding period of last fiscal. The domestic sales during this period increased by 8.51 percent but exports registered a decline of 8.91 percent. He said performance of north and south-based mills depicted different trends both in domestic sales and exports. He said local sales of the north-based mills increased by 7.77 percent to 15.928 million tonnes while the south-based mills registered higher domestic consumption by 11.81 percent to 3.701 million tonnes. In exports, however, the mills in the north suffered comparatively less decline than in the south. The cement producers based in north exported 5.087 million tonnes of cement posting a decline of 6.23 percent over exports made during the same period last year. The exports of south region mills declined by 15.29 percent to 1.928 million tonnes.

Among the export markets, the Afghanistan market remained relatively stable as exports declined nominally by 0.15 percent to 3.778 million tonnes. Exports to India increased by 15.19 percent to slightly over half million tonnes. This includes exports by sea, as well as, through Wagah border. Exports to other destinations through sea however decreased by 16.96 percent to 2.699 million tonnes. Cement industry people said that cement is one the major commodities that is abundantly available in Pakistan and can be exported to India through the land route. Despite tall claims to increase bilateral trade, the respective governments failed to remove non-tariff barriers imposed on Pakistani products. There is currently a labour strike on Indian side resulting in piling up of consignments, which is affecting the movement of trucks from Pakistan.

Besides, merely 10 wheeler trucks from Pakistan are allowed to cross the border and maximum weight may not be more than 40 tonnes per truck. Unfortunately, most of the available transportation for cement has a loading capacity of more than 40 tonnes.

Availability of 10 wheeler trucks with a loading capacity up to 40 tonnes for cement is limited; resulting in the cement industry being unable to export its surplus capacity

There is only one scanner installed at the new gate at Wagah border resulting in long queues creating hurdles and delay for Pakistani exports to India. The Pakistani exporters have demanded of the government to look into the matter and allow trucks with a loading capacity up to 80 tonnes instead of 40 tonnes. They further urged the government that exporters should also be provided all necessary facilities at the border points so that they could easily clear their consignments.\05\08\story_8-5-2012_pg5_2
Riaz Haq said…
NHA to implement 82 highway schemes at Rs 569bn, reports Daily Times:

National Highway Authority (NHA) is implementing 82 highway schemes at the cost of Rs 569 billion, while 14 new projects are in pipeline costing Rs 95 billion.

The participants of 11th Senior National Management Course visited NHA head office here on Wednesday where

NHA’s member (planning) Sabir Hasan while briefing about the functioning of the NHA to visiting faculty members of the 11th Senior National Management Course said 98 Toll Plazas have been approved on NHA, out of which 84 were operational.

NHA is striving hard for availability of National Trade Corridor (NTC), in the country. Practical advancement is being made for achieving North South economic corridor, providing linkages with Gwadar and up gradation of Karakoram Highway in particulars.

Under NTC programme highways, Motorways, Expressways are being constructed from ports to borders with the view to provide linkages for the Transit Trade. NTC will reduce 50 percent travelling time, decrease 10 percent transportation cost and reduce 70 percent road fatalities.

Rs 300 billion will be spent during the next 5 to 7 years for this gigantic programme. Toll Collection System is being established on modern lines, he added.

He said pragmatic steps have been taken to save asset of highways from bad effects of overloading. To this effect weigh stations have been set up at specific locations to check the overloaded vehicles. In order to ensure construction of durable roads state of the art and advanced technologies are being employed. NHA is attaching great importance to make journey safe and sound on its network, he added.\05\08\story_8-5-2012_pg5_5
Riaz Haq said…
PSMC to post PAT of Rs413mn (EPS 5.02), up 351% YoY, 237% QoQ, reports

The company is expected to announce PAT of Rs413mn (EPS Rs5.02) in 1QCY12, up by a massive 351% YoY. The gigantic rise in the profitability is mainly due to 31%YoY increase in unit sales coupled with 9%YoY increase product prices. Moreover, the other income of the company is also estimated to have helped in boosting up the bottomline of the company as it registers a healthy growth of 49%YoY to Rs196mn in 1QCY12. In the light of historical payout trend, we do not expect any cash dividend from the company with the results.

Company’s bottomline is also expected to jump 237% on QoQ basis due to 23%QoQ primarily due to increase in company’s sales volumes. As the customers prefer to book vehicles with the new year registration, therefore, during the last quarter company’s unit sales remained dull. As such, the other income of the company is also expected to decline (income comes from the customers’ advances).

At current levels, the company scrip is trading at a PE of 5.5x and 6.1x based on CY12 and CY13 earnings estimates, respectively. We recommend ‘Buy’ on the scrip with our revised Jun-12 target price of Rs92/share.
Riaz Haq said…
Here's a Reuters' report on buoyant Pakistani shares market:

Pakistan stocks rallied on Wednesday with strong performances in the chemicals and food sectors, and an easing of fears that another showdown between the government and the Supreme Court might be imminent, analysts said.

The Karachi Stock Exchange (KSE) benchmark 100-share index ended 0.69 percent, or 99.63 points, higher at 14,613.59 points, with a volume of 256.7 million, compared to Tuesday's close of 14,513.96.

Pakistan's Supreme Court on Tuesday released its detailed judgment in a case where it had earlier declared Prime Minister Yusuf Raza Gilani guilty of contempt of court for refusing to reopen corruption cases against President Asif Ali Zardari.

The prime minister received a symbolic sentence of a few minutes' detention in the courtroom, but some lawyers have said the conviction should disqualify him from office. Gilani has said he will appeal against the verdict.

"There was concern that political uncertainty will increase with the detailed judgment of the Supreme Court (in the Gilani case), but it was essentially the same as the earlier order so the situation did not change," said Atif Zafar, a research analyst at the JS Global financial services company.

"It did not dampen the bullish mood in the market today."

Among the top performers were Engro Corporation, which ended 5 percent higher at 118.93 Pakistan rupees, helped by the strong performances of its food and chemicals divisions.

Engro Foods ended 5 percent higher at 77.31 rupees, while Engro Polymer and Chemicals closed 3.51 percent higher at 12.68 rupees.

Chemicals company Lotte Pakistan closed 9.87 percent higher at 10.02 rupees.

In the currency market, the Pakistani rupee ended almost flat at 90.80/85 to the dollar, compared to Tuesday's close of 90.82/88.

The rupee has been supported by remittances, which rose 21.45 percent to $9.73 billion in the first nine months of the 2011/12 fiscal year, compared with $8.02 billion in the same period last year.

In March, remittances totalled $1.14 billion.

Overnight rates in the money market ended lower at 9.10 percent, down from Tuesday's close of 11.25 percent, because of increased liquidity in the market.
Riaz Haq said…
Here's a Businessweek report on Karachi stock market rally:

The Karachi Stock Exchange 100 Index may rally as high as 17,000 this year, Farrukh Hussain, chief investment officer of Karachi-based BMA Asset, Pakistan’s second-biggest private money manager, said in a May 7 interview. That would be the highest level on record. The gauge closed at 14,613.59 yesterday. BMA’s Pakistan Opportunities Fund, the nation’s only offshore, dollar- based fund, returned 23 percent this year, beating 99 percent of its peers, according to data compiled by Bloomberg.

Pakistan’s benchmark stock index has surged 29 percent this year after the government eased rules on a capital-gains tax and demand for energy and building materials bolstered company earnings. The gauge, which slid 5.6 percent in 2011, is trading at 7.3 times estimated earnings, the lowest valuation in Asia, reflecting the country’s struggles to cope with militant attacks and political instability.

“Stocks are dirt cheap compared to regional markets and by any standard of the imagination,” Hussain said. “The change in the capital-gains tax regime provided the much needed impetus but the trigger this year is corporate earnings and market fundamentals.”
Earnings Growth

Company profits in Pakistan will grow an average 20 percent in the year ending June 30, said Hussain, who oversees about $97 million at BMA. Investors should buy fuel explorers, banks and cement stocks, which will have profit growth of 20 to 25 percent, he said.

BMA’s Pakistan Opportunities Fund holds shares in Pakistan Oilfields Ltd. (POL), the nation’s third-biggest energy explorer, Engro Corp. (ENGRO), a maker of fertilizer, food and plastics, and Lucky Cement Ltd. (LUCK), the country’s biggest producer of the building material, Hussain said.

Pakistan Oilfields has gained 11 percent this year, Lucky Cement 77 percent, and Engro 67 percent. The shares are trading at less than 7 times estimated earnings, according to data compiled by Bloomberg.

“This is the world’s sixth-most populous country and a population of 180 million people who need housing, energy and food,” Muddassar Malik, chief executive officer of BMA, said.

Malik in September 2010 predicted a rally in stocks after Pakistan’s deadliest floods, which caused losses estimated by the government at $7 billion. The Karachi 100 share index jumped 20 percent in the last three months of that year.
Trading volumes have surged since Jan. 21 when Pakistan decided to ease rules on a capital-gains tax, exempting some investors from declaring their source of income. Average daily trading volume for the past three months almost tripled to 172 million shares from 61 million shares a year earlier, according to data compiled by Bloomberg.

“There’s been unprecedented turbulence in Pakistan and we don’t try to hide that,” Malik said. “But it’s also a story that’s yet to be discovered.”
Riaz Haq said…
Here's a Nation report on UNESCAP's projection on Pakistan's economy:

The economy of Pakistan is projected to grow by 4 percent in 2012, according to the United Nations Economic and Social Survey of Asia and Pacific.In its report on Thursday, it said the gross domestic product (GDP) in Pakistan is projected to grow by 4 percent in 2012 which is an improvement from 2.4 percent growth in 2011.Speaking at the launch of report, economist Dr Ashfaq Hassan, said the economic growth of the country “has increased mainly due to the enhanced output of agriculture sector”. He said the agriculture sector was improving due to the post-flood recovery in cotton, rice, wheat, sugar cane and other minor crops.Dr Ashfaq said cut in monitory policy by 200 basis points by the State Bank of Pakistan also supported the economic growth of the country."Pakistan, after several increases in the policy rate, lowered the policy rate by 50 basis points in July 2011 and further by 150 basis points in October, 2011 despite inflation remains elevated. The moves were aimed at stimulating private investment and economic growth."The GDP growth in the country slowed considerably to 2.4 percent in fiscal year 2011 from 3.8 percent in the previous year, mainly due to prevailing security concerns, the exogenous shock from elevated oil prices and unprecedented floods in a large part of the country and shortage of electricity and natural gas have also hampered the economic growth, he added.The economic survey of Asia reported that to reduce the budget deficit in Pakistan, the government was making efforts to improve tax compliance and broaden the tax base.The report said that current account of balance of payments in the country registered surplus in 2011."In Pakistan, the external sector registered a surplus on the current account, making it a bright spot of the economy in 2011", the report added.According to the report the exports increased by 29.3 percent and workers' remittances reached an historic level of more than $11.2 billion in 2011.Rising prices of value-added textiles helped propel the rapid growth of exports. Foreign exchange reserves also increased considerably.The report further said that in order to address energy shortages, the government should take various measures including setting up viable new power projects, minimizing transmission and distribution losses including theft of electricity, increasing exploration of natural gas, crude oil and coal, tapping of regional markets and setting up infrastructure for energy imports.The report said that widespread poverty continues to be major challenge in South Asia. "To fight against poverty, countries need to continue to implement economic reforms to improve productivity, strengthen public institutions, improve economic governance and build social safety nets to protect the more vulnerable segments of the population", the Economic Survey of Asia added.Clovis Freire, representative said on the occasion that Asia and the Pacific faces another year of slowing growth as demand for its exports falls in developed nations and capital costs rise, but the region will remain the anchor of global economic stability.He said that the growth rate of the region's developing economies is projected to slow down to 6.6 percent in 2012 from 7.0 percent last year compared to a strong 8.9 per cent in 2010.

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