PACS-L Archives

April 2008

PACS-L@LISTSERV.JMU.EDU

Options: Use Monospaced Font
Show HTML Part by Default
Show All Mail Headers

Message: [<< First] [< Prev] [Next >] [Last >>]
Topic: [<< First] [< Prev] [Next >] [Last >>]
Author: [<< First] [< Prev] [Next >] [Last >>]

Print Reply
Subject:
From:
Ehsan Ahmed <[log in to unmask]>
Reply To:
Pakistani-American Cultural Society <[log in to unmask]>
Date:
Wed, 2 Apr 2008 15:04:46 -0400
Content-Type:
multipart/related
Parts/Attachments:
text/plain (7 kB) , text/html (24 kB) , image001.gif (24 kB) , image004.gif (4 kB) , image009.gif (4 kB) , image010.gif (66 kB) , image011.gif (66 kB) , image012.gif (66 kB) , image013.png (66 kB) , image014.png (66 kB) , image015.png (66 kB) , image016.png (66 kB)
Search Results for Selected Items

	

http://s.wsj.net/img/b.gif

 <http://online.wsj.com/home> The Wall Street Journal

	http://s.wsj.net/img/b.gif


April 2, 2008 

	
	

 


http://s.wsj.net/img/b.gif


HEARD IN ASIA 

			

DOW JONES REPRINTS 

http://online.wsj.com/img/g.gif

http://online.wsj.com/img/b.gif

http://online.wsj.com/img/reprintsIcon.gifThis copy is for your personal,
non-commercial use only. To order presentation-ready copies for distribution
to your colleagues, clients or customers, use the Order Reprints tool at the
bottom of any article or visit:
www.djreprints.com.

. See <http://online.wsj.com/public/resources/documents/Reprint_Samples.pdf>
a sample reprint in PDF format.
. Order a reprint of this <JavaScript:CopyrightPopUp()>  article now.





Pakistan Could Become Cash Magnet 
If New Government Passes Some Tests


Foreign Investors 
Waiting, Seeing; 
Budget Challenge

By NIRAJ SHETH
April 2, 2008; Page C5

NEW DELHI -- Pakistan's largely peaceful elections and swearing-in of a new
prime minister have brought it some stability. But foreign capital -- which
stopped coming in because of the nation's political turmoil -- is still
sitting on the sidelines.

Investors say they are eager to start putting money back into the country,
one of the few emerging markets performing well this year. (The Karachi 100
Stock Exchange 100 Index is up about 8% in 2008.)

However, they are waiting to see whether the new government will restart
privatization moves halted last year and take other measures to repair an
economy plagued by a budget shortfall, a staggering current-account deficit
and inflation.

For years prior to 2007, foreign investment in Pakistan rose steadily. For
the fiscal year that ended in June, the country received $5.2 billion in
foreign direct investment and $1.8 billion in portfolio investment.

[Graphic]But that was a high-water mark, followed by a temporary state of
emergency, riots and the killing of opposition leader Benazir Bhutto.
Investors turned sour; in the eight months that ended in February, foreign
investment was just two-thirds what it was in the same period one year
earlier.

At Pakistan's stock market, the numbers look surprisingly good. Even with
the turbulence of 2007's last months, the Karachi 100 index was still up 40%
for the year. And its performance so far in 2008 compares favorably not just
with Western markets, but with the Bombay Stock Exchange's Sensex index,
which has dropped 23%.

Still, the Pakistani market's performance hasn't been enough to tempt people
to invest further. "We're not ready yet to put in a lot more," says Slim
Feriani of Progressive Asset Management, a London-based emerging markets
fund that has invested $3.2 million in Pakistan. "We just want to let the
dust settle a bit."

This is despite the peaceful transition of power that appears to be under
way after nine years of President Pervez Musharraf's military-backed rule.
In February's democratic parliamentary elections, which Mr. Musharraf
ushered in, his supporters were roundly defeated. The new government has
been formed by two opposition parties, including Ms. Bhutto's Pakistan
People's Party.

Investors and analysts point to a few areas where the new government needs
to prove itself before the foreign capital comes back. One is the stalled
process of privatizing the banking sector. Many credit the sale of shares in
United Bank in 2002 as the trigger for five years of strong capital inflows.
But the past eight months have seen little activity in a sector heavily
favored by foreign investors keen on trying to tap Pakistan's growing
consumer base.

The new government's first test is coming up. Last year, Pakistan announced
plans to sell stakes in the National Bank of Pakistan and Habib Bank through
global depositary receipts, or GDRs, on the London Stock Exchange. As
political storm clouds gathered, the sales -- expected to be for a 23% stake
in NBP and a 7.5% stake in Habib Bank -- didn't materialize.

"What everyone is hoping is that the government will resume the GDR
process," says Salman Ali, head of research in Pakistan for Citigroup. "It
has very little choice if it wants to send the signal that it's business as
usual."

Investors say they would also like to see more privatization in the oil
sector, which also draws a large share of foreign capital. But unlike in
banking, the Musharraf-led government made no promises to open up oil
exploration to further private investment.

A bigger, potentially thornier task for policy makers still lies ahead.
Pakistan is facing a large budget shortfall and a current-account deficit
equivalent to 5.3% of its gross domestic product. Skyrocketing oil costs
threaten to lead to energy shortages for much of the country. And climbing
food prices could raise inflation to as high as 9%, the central bank said
last week. In February, inflation was 8.4% on an annual basis.

Investors are asking if the new government, formed by parties that have
promoted populist policies, can take the measures needed to avert an
economic crisis. "Let's not skirt around the issue that these guys have been
in power in the past and they've had a pretty bad track record in governance
and also dealing with foreign investors," says Sakib Sherani, an economist
with ABN Amro Bank in Pakistan.

In spite of the economic woes, some observers expect the Karachi market to
gain 20% to 25% in 2008, in line with growth in corporate earnings. The
expectations are based on the idea that some sectors of the economy, such as
real estate, are undervalued, and on the continuing attractive valuation of
Pakistani stocks. By some estimates, stocks in Pakistan have a historic
average price-earnings ratio of 11.

The prospect of a significant U.S. recession, which worries investors in
most countries, doesn't seem to be on many radar screens in Pakistan. Unlike
India, Pakistan isn't a large trade partner of the U.S. "It goes in our
favor that because of our low level of exports, we are insulated from global
developments," says Khurram Shehzad, who manages a $500 million equities
fund at Karachi-based National Fullerton Asset Management.

The uncertain fate of Mr. Musharraf also doesn't seem to bother investors.
While he was elected in November for another five-year term, officials in
the new government have vowed to remove him from power. Most investors say
Mr. Musharraf's defeat in the February polls, and his reduced standing with
parliamentary democracy restored, make him a less important factor in
Pakistan's future. "He's no longer as relevant," Mr. Sherani says.


 

URL for this article:
 <http://online.wsj.com/article/SB120706936540680715.html>
http://online.wsj.com/article/SB120706936540680715.html


 

	

Copyright 2008 Dow Jones & Company, Inc. All Rights Reserved 

This copy is for your personal, non-commercial use only. Distribution and
use of this material are governed by our
<http://online.wsj.com/public/subscriber_agreement> Subscriber Agreement and
by copyright law. For non-personal use or to order multiple copies, please
contact Dow Jones Reprints at 1-800-843-0008 or visit
<http://www.djreprints.com> www.djreprints.com. 

 

 <http://online.wsj.com/article_print/SB120706936540680715.html>
http://s.wsj.net/img/closeWSJ.gifClose

RELATED ARTICLES FROM ACROSS THE WEB

Related Articles from WSJ.com 

.  Pakistan's
<http://online.wsj.com/article/SB120519744350025913.html?mod=sphere_ts&mod=s
phere_wd>  Progress  Mar. 11, 2008

.  Anti-Musharraf
<http://online.wsj.com/article/SB120506893797522359.html?mod=sphere_ts&mod=s
phere_wd>  Parties in Pakistan Agree to Power-Sharing Government  Mar. 09,
2008

.  How
<http://online.wsj.com/article/SB120395109205290503.html?mod=sphere_ts&mod=s
phere_wd>  a System Error in Pakistan Shut YouTube  Feb. 26, 2008

.  Musharraf
<http://online.wsj.com/article/SB120344482965277323.html?mod=sphere_ts&mod=s
phere_wd>  Plans to Guide Democratic Transition  Feb. 19, 2008

More
<http://www.sphere.com/search?q=sphereit:http%3A%2F%2Fonline.wsj.com%2Fartic
le%2FSB120706936540680715.html>  related content Powered by Sphere
http://s.wsj.net/img/sphereIcon.gif

 

 

Ehsan Ahmed

Head, Department of Economics

College of Business

MSC 0204, 434 Showker

James Madison University

Harrisonburg, VA 22807

Phone: 540-568-3215

Fax: 540-568-3010

Office Hours & Other Information: 

http://cob.jmu.edu/grunewlh

 

 

 



ATOM RSS1 RSS2