Pakistan's KSE100 is the World's Best Performing Stock Index

[Riaz Haq]

Pakistan's KSE100 (Karachi Stock Exchange 100) index closed the year 2016 as the world's best performing stock market index over one-year and five-year periods, according to data available from Bloomberg. It has not only outperformed India's Sensex index but also the Morgan Stanley Emerging Markets index.

Source: Bloomberg

Pakistan's key index KSE-100 has rocketed up nearly 46% in 2016, far outpacing India's Sensex's 2.57% rise and MSCI emerging market's 8.42% increase. Similarly, over 5 year period, KSE-100 has soared 321% vs India's Sensex rise of 72% and Morgan Stanley emerging market index decline of 7.72%.

Source: Bloomberg

Pakistani stock market gains are driven by multiple factors. Dramatically improved security has brought investors and accelerated the nation's GDP growth. Adding to that is the optimism accompanying Morgan Stanley's decision to bring Pakistan back into its emerging market index that has spurred more buying by foreign index fund managers.

Source: South Asia Terrorism Portal

Other major indicators such as rising cement and energy consumption as well as growing sales of motorcycle and automobiles. A big driver of these improvements is the Chinese commitment of more than $50 billion to finance China Pakistan Economic Corridor (CPEC).

China-Pakistan Economic Corridor (CPEC) is expected to add over 2 million direct and indirect jobs to Pakistan's economy and boost the country's GDP growth rate to 7.5%.  If all goes well and on schedule, of the 21 agreements on energy– including gas, coal and solar energy– 14 will be able to provide up to 10,400 megawatts (MW) of energy by March 2018. According to China Daily, these projects would provide up to 16,400 MW of energy altogether. In addition, there will be roads, rail tracks and oil and gas pipelines stretching thousands kilometers to connect Pakistan's Arabian sea ports to landlocked Western China.

After years of underinvestment and slow growth, Pakistan is finally seeing a lot of investment and development activity.  Pakistan's economic recovery is in full swing with double digit growth in multiple industries, including auto, pharma, chemicals, cement, fertilizers, minerals, etc.  It is expected to pick up steam over the next several years with new investments on the back of China-Pakistan Economic Corridor related projects. The challenges to sustain this growth ranging are many, among the biggest are continuous improvement in security, maintaining political stability and timely execution of projects.

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[Riaz Haq]

India is one of world’s most expensive stock markets

At the current forward price-earnings multiple, the valuation for the Indian market is well above its mean

The Indian market is one of the most expensive in the world, immediately after the US, according to estimates from Citi Research. Graphic by Naveen Kumar Saini/Mint

With the earnings season about to start, the chart illustrates why the fate of the Indian markets depends on the ability of Q4 earnings to beat expectations.

As the chart shows, the Indian market is one of the most expensive in the world, immediately after the US, according to estimates from Citi Research.

At the current forward price-earnings multiple, the valuation for the Indian market is well above its mean.

To be sure, abundant liquidity, both from foreign and domestic investors, has been driving up stocks.

As the outlook for investment in real estate and gold has faded, investors have switched to equities.

But the record shows that markets fell in 2010, 2015 and 2016 from levels only slightly above current valuations. It’s time for earnings to catch up and for investors to be cautious.

http://www.livemint.com/Money/0fhFFLhZaqt3Gzm9ZMWOxH/India-is-one-o...