Pakistan stocks may tumble
The rally that made Pakistan’s stock market the best performer in Asia during the past five years was interrupted last quarter. Forecasts of slower profit growth and a cooling economy suggest further setbacks lie ahead.
The KSE 100 climbed almost 800 percent in the past five years, the fourth-biggest rally of 77 global benchmarks tracked by Bloomberg. Stocks soared as Pakistan, under the leadership of President Pervez Musharraf, aligned itself with the US in the war on terror that followed the Sept. 11 attacks in 2001. In the first quarter, the index gained 20 per cent, three times as much as Morgan Stanley Capital International’s Asia- Pacific index.
Spending on reconstruction after an earthquake in October and the prospect of lower interest rates should ensure that the KSE 100 hangs onto its gains, analysts said. Shuja Rizvi, head of equity sales at Capital One Equities Ltd. in Karachi, forecasts the index will rise to 13,000 this year, a 9 percent gain from last week’s close. “The market is not as bullish as in previous years, but we may see a gradual increase,” he said.
Pakistan has benefited financially from helping the US combat terrorism. Aid and loans helped swell foreign-exchange reserves to US$12.4 billion from US$3 billion. The funds are helping the government finance a World Bank estimate of US$5.2 billion of spending to rebuild houses, roads and buildings destroyed by the Oct. 8 earthquake, which killed 73,331 people in the north and left 3 million homeless. The government will spend more than $35 billion on ports, power, roads, water and workers during the next five years, according to Merrill Lynch.
Building-related stocks will outperform the market because of the outlays, Medina said. Shares of DG Khan Cement Co., the country’s biggest cement maker, has surged 74 per cent since the earthquake. Cement production will double by the end of 2007, the All Pakistan Cement Manufacturers Association predicts.
Published under Cement News
