With KSE at record 13,985.89 points it looks that way, but others would disagree, please read the last para in bold.
http://www.iht.com/articles/2007/07/10/business/sxasia.php
Around the Markets: Pakistan stock rally could be nearing an end
By Khalid Qayum Bloomberg NewsPublished: July 10, 2007
ISLAMABAD: Pakistan stocks, Asia’s best performers since President Pervez Musharraf seized power in a coup eight years ago, may be set for a sell-off as his bid for a new five-year term meets widespread public opposition.
The rally has made shares 40 percent more expensive than their eight-year average, according to Invisor Securities in Karachi. At the same time, average annual economic growth of 7.5 percent over the past four years is pushing up inflation and interest rates.
“There is definitely a need for a correction,” said Douglas Polunin, a fund manager at Polunin Capital Partners in London. “Politically, things are a bit dangerous, and there is a lot of uncertainty.” He sold out of Pakistan stocks a year ago.
History supports Polunin. The Karachi Stock Exchange 100 index rose 22 percent in the second quarter. In five of the last seven quarters that it posted gains greater than 20 percent, it fell in the next three months by an average of 13 percent.
The KSE index has leapt 858 percent in dollar terms since Musharraf ousted the government of Nawaz Sharif in a bloodless coup on Oct. 12, 1999, as his support of the U.S.-led war on terrorism attracted foreign aid and investment.
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Jahangir Siddiqui & Co., the second-biggest holding company by weight in the key index after Arif Habib Securities, has soared 8,130 percent. Shares of EFU Life Assurance, the nation’s biggest listed life insurer, have jumped 6,086 percent since Musharraf’s rule began.
Stocks climbed in the second quarter this year despite street demonstrations opposing Musharraf’s move to seek a new five-year term. He is soliciting a vote from the existing Parliament, which is dominated by his supporters, later this year, rather than awaiting national polls that are due by Jan. 15. The KSE index closed at 13,985.89 on Friday, a record high.
Investors won’t be able to keep ignoring politics in the second half of 2007, said Zaheeruddin Khalid, head of research at Al-Meezan Investment Management.
“The market is due for a correction of 1,000 to 1,500 points,” said Khalid, a fund manager at Al-Meezan in Karachi. “It will be difficult for investors to ignore the political situation because nobody knows who will win the elections and how much control Musharraf will have. It’s a big question mark hanging over the economy.”
Khalid said his fund had sold shares in the past month, declining to name them.
The country’s lawyers have demonstrated against the March 9 removal of the nation’s top judge, Iftikhar Muhammad Chaudhry, by Musharraf on charges of misusing authority, and supporters of opposition parties have joined the demonstrations since then. They are demanding the reinstatement of the chief justice, who, according to Dawn newspaper, may have ruled against Musharraf seeking a second term.
Inflation is also on the rise. Consumer prices in May increased 7.41 percent from a year earlier, following a gain of 6.92 percent in April, the government said June 13. Pakistan will miss the 6.5 percent inflation target for this fiscal year, the central bank governor, Shamshad Akhtar, said June 20.
July inflation data will be vital for providing interest rates guidance over the next six months, Akhtar said. The central bank will review interest rates by July’s end. It last raised the benchmark rate to 9.5 percent in July last year.
Last month, the government for the first time in a year raised the interest rate on the benchmark 10-year defense savings certificate to 10.15 percent from 10 percent, increasing the attractiveness of the government’s savings pool versus equities.
** Still, for Mark Matthews, the chief Asian strategist at Merrill Lynch, Pakistani stocks are his favorite in Asia. “Pakistan is too far down the road to prosperity to turn back now, and nobody would want to ruin this very strong economy,” he said. “People have a perception that politics is going to get worse. I disagree.”
Preliminary statistics show that foreign direct investment almost doubled to a record $6.5 billion in the year to June 30. Standard Chartered in September completed a $487 million purchase of Union Bank, the biggest acquisition in Pakistan’s banking history. Philip Morris International unit plans to buy a majority stake in the cigarette maker Lakson Tobacco for $338.9 million.
That suggests multinational companies are confident in Pakistan, Matthews said. **