LAHORE

Pakistan stocks market welcomed business-friendly PML-N government which came with clear objective to revive economy through energy sector reforms and incentivising businesses – sharp contradiction to PPP’s pro-agricultural policies. As a result, Pakistan’s GDP grew 4.1pc in FY14, while 4.5pc LSM growth helped manufacturing sector grow by 5.6pc. Historically, there has been a positive correlation between LSM and KSE performance as most of the listed companies represent manufacturing sector.

As per data, the fiscal year ending June 2014 has been one of the best years for Pakistan stocks, as in the outgoing fiscal year, benchmark Index gained 41 per cent or 8,647 points and 42 per cent in $-terms.

According to market experts, during 1H2014, Pakistan market beat all other markets of the world as Pakistan ranked No.1. New political setup, improving economic indicators and foreign inflows created positive sentiments in the market. Although Pakistan’s benchmark KSE-100 Index returned 17pc in PKR-terms, strengthening of the local currency against US-Dollar helped Pakistan stand in the leaders table with 25pc return in $-terms. To highlight, Pakistan stood amongst top 10 markets in 2012 and 2013.

Vahaj Ahmed, a stock market expert at Topline, stated in a report that fuelled by newly-elected investor-friendly govt, economic and energy sector reforms, both local and foreign investors participated in Pakistan stocks in large numbers. Pakistan FY14 return of 41pc compares favourably with the last 10-year and 20-year average annual return of 21pc. In FY14, MSCI Pakistan gained 23pc compared to 31pc gain of MSCI Frontier Markets (MSCI-FM) and 16pc gain of MSCI FM-Asia. Moreover, amongst Asian frontier markets categorised by MSCI, Pakistan ranks first outpacing Bangladesh (21pc), Vietnam (13pc) and Sri Lanka (-1pc).

Contrary to early doubts, Pakistan external account posted surplus of $3.3 billion in 11MFY14. As a result, country’s forex reserves crossed $14b mark, helping Pak-Rupee strengthen 6pc against US-Dollar in 1H2014. Other major impetus to the market came from higher foreign inflows. Foreign investors, that hold $5.7b worth of Pakistan shares which is 33pc of free-float (8pc of market cap), remained net buyers in FY14. During FY14, foreigners bought $2.1b and sold $1.8b, resulting in net inflow of $248m. During 1H2014, net foreign inflows stood at $261m compared to $411m in corresponding period last year.