Pakistani Stock Market Offers Great Value after Stellar Performance in 2016
By RiazHaq
CA
Pakistan's KSE-100 continues to offer attractive valuations for investors in 2017. Its equities are trading at a forward price-earnings ratio of just 9.1, according to Pakistani brokerage firm Arif Habib Limited.
Pakistani shares are on offer at a deep discount to the Indian shares trading at 17.3 price-earnings multiple. While India's stock market is among the world's most expensive, the Pakistani market is among the cheapest. Pakistani shares are now trading at 47.3% discount to Indian shares.
In spite KSE-100's major run up of 46% in 2016, far outpacing India's Sensex's 2.57% rise and MSCI emerging market's 8.42% increase, Pakistani equities (PE ratio 9.1) are still cheaper than Asian emerging markets (12.1) and China (11.9), according to published data.
Pakistani shares are now trading at 47.3% discount to Indian shares, 31% discount to Asia Emerging Market index and 23.5% discount to Chinese shares.
Consumer confidence index in Pakistan jumped five point from the prior quarter to reach 106 in Q4/2016, according to Nielsen’s global survey of consumer confidence for 63 countries released recently.
Here's an excerpt of Nielsen's report Africa/Middle East region that includes Pakistan:
"Consumer confidence in the Africa/Middle East region declined in the fourth quarter, falling four points to 83, the lowest level in more than three years. Confidence was highest in United Arab Emirates, which held steady from the third quarter at 108. Pakistan was the only country where consumer confidence moved in a positive direction, rising five points from the third quarter to 106, the highest score for the country since it was added to the survey in 2008."
The share of Pakistani respondents worried about job security dropped to 21%. 51% of Pakistanis said they are optimistic about better job opportunities in the next 12 months, according to the survey.
“The findings of the consumer confidence reflect a favorable atmosphere in Pakistan. The set of factors that influence the confidence levels of Pakistani consumers goes beyond economics and business, and is reflective of improved security conditions, increased energy availability and low inflation rates,” reported the survey.
“China-Pakistan Economic Corridor (CPEC) has also led to a higher activity in large-scale manufacturing and construction, opening more investment opportunities,” said Nielsen Pakistan Managing Director Quratulain Ibrahim, according to Pakistan's Express Tribune newspaper. “We hope to see this optimism among Pakistani consumers during the coming months.”
Pakistani banks have boosted lending to businesses and consumers. Large-scale manufacturing sector borrowed Rs 225 billion in 2016, up from Rs 119 billion in 2015. Consumer loans have jumped from Rs 29 billion in 2015 to Rs 70 billion in 2016. Auto financing soared 32% to Rs 30.7 billion in 2016, according to the State Bank of Pakistan.
Pakistani consumers and businesses are feeling increasingly confident with improved overall security, rising foreign and domestic investments and better employment prospects. They are earning, borrowing and spending more to further stimulate the economy thereby creating a virtuous cycle. Low oil prices and relatively subdued inflation are also helping. It's now up to Pakistan's political, economic and military leadership to maintain this growth momentum.
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