A recent report posted by Bloomberg stated that ‘High-Risk Hunters’ have pushed Pakistan’s Stocks to the “Top Start of the Decade”. The report stated that foreign investors are snapping up Pakistani equities again.
Global funds have bought $91 million of the nation’s shares in January – set for the biggest monthly inflow in almost four years – as they pile into risk assets around the world. That’s helped propel the KSE-100 Index to its best start of a year since 2007, rebounding from a sell-off that made Pakistan the worst stock market globally last year.
“This is just the high-risk hunters who are willing to bet at the beginning of the year,’’ said AAH Soomro, Karachi-based senior advisor at Tundra Fonder AB, which manages $350 million in equities and has been a buyer of Pakistan’s stocks this month.
The resumption of inflows into Pakistan reflects the euphoria that’s engulfed the markets, even as major gauges flash overbought signals. Emerging market stocks took in $8.1 billion in the week to January 24, the second-biggest amount ever amid bets on broadening global economic growth, Bank of America Merrill Lynch said in a research report citing EPFR Global data.
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Political turmoil following the ouster of former Prime Minister Nawaz Sharif and widening deficits led to $494 million of stocks outflow last year even as the country was restored to emerging-market status by MSCI Inc. Measures to repair the economy before elections in July — an unexpected hike in interest rates last week and the devaluation of the rupee in December to bolster foreign-currency reserves — are helping revive investor sentiment.
“The currency has been devalued a bit already and even though there might be another devaluation later this year, it shouldn’t be massive,” said Hertta Alava, head of emerging markets at FIM Asset Management Ltd. in Helsinki. More funds are waiting on the sidelines until the July polls are done “because in many other countries we’ve seen that election outcomes can be surprising,” she said.
About half of this year’s inflows have come from index-tracking funds and the remainder from investors who’ve made money in Pakistani stocks previously, said Ovais Ahsan, head of broking at Optimus Capital Management Pvt. The KSE-100 Index has risen in seven of the nine years since the nation was reduced to frontier status in 2009.
“When global investors make money in stock markets, they never forget and always come back,” said Ahsan.
Pakistan’s stock market index has gained more than 25% since mid-December 2017 and remained the best performing market of the world since 2018 began. Within the first month of the New Year, the index has already hit 45,000 points which is a positive sign.
The previously best performing stock exchange in Asia had fallen, wiping off billions of dollars in value. It is difficult to find method in the madness of the stock market. From Asia’s best performing market in 2016 with a mouth-watering return of 44%, the Pakistan Stock Exchange (PSX) became one of the worst performing markets the very next year with a negative return of 17.4% in 2017.
It is these puzzling ups and downs in the equity market that charm even small means investors, who, despite having burnt their fingers, return to the market to try their luck just one more time.
