Cautious hope for battered Pakistan markets in 2010

KARACHI: Pakistan share prices gained more than 60 per cent in 2009 after an abysmal 2008 which saw the once-promising market battered by political turmoil, militancy and the global recession.

HIGH EXPECTATIONS: Smoke rises from a factory during the year’s last sunset in Karachi. — AFP photo

HIGH EXPECTATIONS: Smoke rises from a factory during the year’s last sunset in Karachi. — AFP photo

Despite a shaky start to 2009 with deadly bombings by Taliban insurgents and bruising military operations against extremists, analysts say that 2010 may see the bourse scrambling further into recovery.

The benchmark KSE-100 index finished 2008 at 5,865.01, a 58 per cent drop on 2007, when Pakistan was named one of the most promising emerging markets.

The index — which has about 650 listed companies — closed on New Year’s Eve 2009 at 9,386.92, and dealers are hoping for another jump in 2010.

“We expect Pakistan’s equity market to cross 11,500 points in 2010, thereby providing 22 per cent estimated gains,” said Mohammad Sohail, chief executive of Topline Securities brokerage firm.

“We estimate better returns later next year since political issues, security concerns, capital gain uncertainty and power shortages would partially be settled,” he added.

In February, the market suffered its worst loss in two-and-a-half years after the Supreme Court disqualified the main opposition leader from contesting elections, but political meltdown was averted and the bourse rallied.

And although attacks by the Taliban killed a record number of people in Pakistan in 2009 — 1,200 deaths, up 30 per cent on 2008, according to an AFP tally — most of the violence has struck the troubled northwest.

The financial hub of Karachi has been largely spared the bloodshed, although Monday’s bombing of a Shiite religious procession killing 43 people in the city of 14 million people raised fears that it was again in the militant’s sights.

A report by Topline Securities says 92 per cent of attacks in 2009 occurred in North West Frontier Province and southwestern Baluchistan.

“The two provinces have only 20 per cent of (Pakistan’s) population with hardly any role in the overall economy, whereas major industries and business activities occur in central Punjab and southern Sindh province,” it said.

The military also launched a number of offensives against Taliban strongholds across the northwest in 2009 and are claiming success — although at a great financial cost to the nation, experts say.

“Every year Pakistan loses eight to nine billion dollars on the war on terror,” said Ashfaq Hasan Khan, a former government economic adviser, lamenting a lack of support from Western partners including the United States.

“Pakistan pays that much money on the war on terror every year and in return we just receive good words but no tangible money,” he told AFP.

Islamist violence aside, the global recession, power shortages and soaring inflation have hit Pakistan hard.

Islamabad approached the IMF in 2008 for a rescue package and the Fund’s executive board last month approved the release of US$1.2 billion more under a US$11.35 billion loan programme to the cash-starved nation.

“The vulnerability of Pakistan’s balance of payment has decreased because of its programme with the IMF,” Khan said.

But he warned the government must concentrate not only on the battle against militancy, but also boosting the flagging economy.

In September 2008, inflation hit a 30-year high and although it has since recovered, other indicators remain worrisome.

Pakistan recorded two per cent GDP growth last fiscal year, which ended on June 30, the worst-recorded economic growth since the financial year 1997-98.

The nation has also been battered by a manufacturing slump with exports down 2.6 per cent in the last fiscal year.
Foreign investment in nuclear-armed Pakistan declined by 42.7 per cent, a state economic survey said.

Electricity, gas and petrol prices have doubled in the last two years, while the country also faces a crippling energy crisis, producing only 80 per cent of its power needs, causing debilitating blackouts and suffocating industry. — AFP

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