Pakistan: back from the brink

Pakistan's stockmarket "is coming out of hibernation", says Citigroup. The Karachi Stock Exchange index has jumped by more than 50% to above 9,000 in 2009 as the economy stepped back from the brink of default late last year and stirred interest among foreign investors.

The International Monetary Fund (IMF) has just approved a loan of $11.6bn, up from the $7.6bn agreed last November, to help stabilise the economy; interest rates were cut by 1% last month after inflation slid to 11% from 25%; remittances are flowing in; ratings agency S&P has just upgraded the country; and the profit cycle seems to have turned, says Citigroup. The consumer sector's profits are up 32% year-on-year.

The market is also Asia's cheapest, on a p/e of around seven. Foreigners "are back with flows not seen since February 2008"; net inflows reached $93m in August. However, the central bank is worried that the recovery will prove "slow and painful", while the IMF's Adnan Mazarei notes that political unrest is likely to remain a problem with a third of the country living below the poverty line. So while stocks look set for a short-term fillip, the long-term outlook remains as murky as ever.

Start your trial of MoneyWeek today

Get unparalleled financial insight, analysis and expert opinion you can profit from.

Start your trial

Sign up for MoneyWeek’s free twice-daily newsletter.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Sign up