Time to Sell India Short and Go Long on Pakistan?

[RiazHaq]

Is it time to sell India short and go long on Pakistan?

Indian shares are highly overvalued while Pakistan and Hong Kong shares are trading at very attractive valuations, according to latest data published by Bloomberg. The Indian shares listed in Mumbai are trading at nearly 22 times earnings, more than twice the price-earnings multiples of Karachi and Hong Kong listed stocks.


[TABLE="class: tr-caption-container"]
[TR]
[TD="align: center"]

[/TD]
[/TR]
[TR]
[TD="class: tr-caption, align: center"]Source: Bloomberg[/TD]
[/TR]
[/TABLE]



Hong Kong's Hang Seng benchmark gauge for $4.3 trillion of shares was valued at 9.8 times reported earnings on Thursday, a 44 percent discount to the MSCI All-Country World Index, according to Bloomberg. That’s the cheapest level among developed markets worldwide and compares with a multiple of 10.2 for Pakistan’s KSE 100 Index. Russia’s Micex has the lowest valuation among major markets, trading at about 9.5 times profits.

Talking about Pakistan, Charlie Robertson, London-based chief economist at Renaissance Capital Ltd. told Bloomberg that “It (Pakistan) is the best, undiscovered investment opportunity in emerging or frontier markets...What’s changed is the delivery of reforms -- privatization, an improved fiscal picture and good relations with the IMF.” Pakistan is a reform story like neighboring India’s, but only better, Renaissance’s Robertson added.

The massive Chinese commitment to invest $46 billion in Pakistan's energy and infrastructure projects as part of China-Pakistan Economic Corridor has added to the excitement about Pakistan's brightening prospects.

[TABLE="class: tr-caption-container, align: center"]
[TR]
[TD]

[/TD]
[/TR]
[TR]
[TD="class: tr-caption"]CPEC Projects Map[/TD]
[/TR]
[/TABLE]


China-Pakistan Economic Corridor (CPEC) is highly strategic for both China and Pakistan. It is expected to dramatically boost investment and trade activity in Pakistan via 29 industrial parks and 21 mining zones along the western, central and eastern routes.

This (China's $46 billion investment in Pakistan) can not be purely politically driven. Beijing is commercial: CEO’s, not think tank intellectuals, travel with politicians. Barron's Asia​

Spurred by Chinese investment, the smart money is taking notice of Pakistan as an attractive investment destination. The investors are looking at the fact that Pakistani stocks have been outperforming both emerging and frontier markets for several years. The benchmark index of the Karachi Stock Exchange (KSE100) is up more than 20% in the last 12 months, according to NASDAQ.com.

Pakistani Shares in 2015:

After a dismal March, MSCI Pakistan rebounded strongly this month, returning 9.1% so far. In April, the iShares MSCI Frontier 100 ETF (FM) rose 4.3%, the WisdomTree India Earnings Fund (EPI) dropped 1.2%, the iShares MSCI India ETF (INDA) fell 1.9%, according to Barron's Asia.

[TABLE="class: tr-caption-container, align: center"]
[TR]
[TD]

[/TD]
[/TR]
[TR]
[TD="class: tr-caption"]Source: Economist Magazine[/TD]
[/TR]
[/TABLE]
KSE-100 Performance:

In 2014, the KSE-100 Index gained 6,870 points thereby generating a handsome return of 27% (31% return in US$ terms), making Pakistan's KSE world's third best performing market. Total offerings in the year 2014 reached 9 as compared to 3 in the year 2013. After a gap of seven years, Rs 73 billion were raised through offerings in 2014 as compared to a meager Rs 4 billion raised in 2013. Foreign investors, that hold US$ 6.1 billion worth of Pakistani shares -which is 33% of the free-float (9% of market capitalization)-remained net buyers in 2014.

Pakistani Shares Valuation:

Even after outperforming both emerging and frontier market indices, Pakistani shares can be bought at deep discounts which make them very attractive, according to Renaissance Capital’s chief economist Charles Robertson. MSCI (Morgan Stanley Composite Index) Pakistan trades at only 8.4 times forward earnings, a 17% discount to MSCI Frontier Markets. For comparison purposes, fellow frontier south Asia markets Sri Lanka and Bangladesh trade at 13.4x and 21.4x respectively. India, included in the emerging market index, trades at 16.8 times.

Key Sectors:

Chinese investment in energy and infrastructure will help stimulate all sectors of Pakistani economy. But the sectors benefiting most from the $46 billion investment will likely include banks, energy and building materials, the sectors which are the favorites of Pakistani billionaire investor Mian Mohammad Mansha.

Being close to the ruling Sharif family makes Mansha the ultimate insider. Beyond his investments in banking, cement, energy and textiles, Mansha is also starting to invest in consumer products sector benefiting from rising incomes, growing middle class and increasing jobs created in Pakistan by the massive Chinese investment. Mansha owns a big chunk of Muslim Commercial Bank (MCB) share. He has recently been pumping more money into energy, cement and dairy businesses. Mansha's DG Khan Cements has announced plans to build a $300 million cement plant near Karachi. In additions, his Nishat Dairies has imported thousands of dairy cows for a dairy farm in Lahore.

Summary:

The $46 billion Chinese investment in energy and infrastructure has brought attention to tremendous investment opportunities in Pakistan, a nation of nearly 200 million people with rising middle class and growing consumption. Pakistani military's recent successes against the terrorists and China's massive investment commitments are expected to boost investor confidence in the country. Higher confidence will help draw other significant investors to invest in Pakistan over the next several years.


http://www.riazhaq.com/2015/08/time-to-dump-india-shares-and-buy.html

 

[abhay]

mungerilal ke haseen sapne

 

[RiazHaq]

Billionaire-Backed Hedge Fund to Short #India Stocks. Lowest long now in 12 months. http://bloom.bg/1NvMF9n via @business


Infina Finance Ltd., a Mumbai-based $190 million hedge fund, has turned the most bearish in a year on India’s stock market and will short if it rallies further.
“Right now we have the lowest net longs than we had in the last 12 months,” Venkat Subramanian, Infina chief executive officer, said in an interview. “If the market goes up any further, I would become net short.”
The long-short equity fund, which counts billionaire Uday Kotak and Kotak Mahindra Bank Ltd. among investors, is expecting a correction as foreigners allocate money to other regions and stock valuations become expensive. Indian equities have rallied as Prime Minister Narendra Modi pledged to revive investments and manufacturing while curbing graft after being swept into office a year ago. The economy grew by 7.5 percent in the January-March period, faster than the previous quarter’s 6.6 percent rate.
“Current market sentiment is very bullish, but it is possible that earnings expectations won’t be met” as it will take at least another 15 months before the government’s actions can bolster company earnings, Subramanian said. “Companies in consumer goods, telecommunication services and auto-components could be the space where significant disappointments could happen.”
The fund, which has the capacity to use leverage though it’s not employing it, has returned about 16 percent every year since its inception in 2008, according to Subramanian.
Earnings Expectations
Earnings for companies in the benchmark S&P BSE Sensex Index are estimated to grow about 31 percent in fiscal 2016. That compares with about 13 percent for those in the MSCI Emerging Markets Index.
The Sensex’s valuation of 15.4 times projected 12-month earnings is about 30 percent higher than the MSCI Emerging Markets Index. The benchmark closed 0.9 percent higher at 28,020.87 points. It has added 1.9 percent this year.
“Things are improving on the domestic front as this government has started doing things which will start showing up in company earnings in 15 to 18 months,” Subramanian said. “But the market has already paid for all of it and that too with foreign money.”
Foreigners have invested $6.3 billion in Indian equities this year compared with $9.9 billion in the first six months of 2014. Overseas fund managers bought stocks and bonds worth an unprecedented $42 billion last year, data compiled by Bloomberg show.
Growth Plans
The fund, which is currently managed by a five-member team that includes three analysts and a dealer, is branching out into private equity and plans to invest in sectors such as food processing, information technology and engineering-related startups.
Infina is setting up a subsidiary in Dubai to invest in overseas markets, especially in U.S. equities. The unit, in which Infina will initially invest 2 billion rupees ($31 million), is awaiting approval from the country’s central bank.
“My own comfort is more with investing in the U.S. market than in other overseas markets,” Subramanian said. “We will look at themes which we can’t get in other parts of the world. For instance in technology and biotech, where the U.S. market has world-beating companies.”

 

[RiazHaq]

The S&P BSE Sensex has plunged 800 points in trade in a matter of two trading sessions, while the Nifty has slipped nearly 300 points, wiping out entire gains made so far in 2015.

Read more at:
http://economictimes.indiatimes.com...ofinterest&utm_medium=text&utm_campaign=cppst

 

[RiazHaq]

#Pakistan monthly GDP is $25 billion in July 2015 (first month of FY 2015-16), up 8.7% from $23 billion in July 2014 http://www.pakistantoday.com.pk/?p=436435


The current account deficit of the country shrunk to negative $159 million in July, the first month of the current fiscal year compared to negative $820 million in the same period last year, according to the data of State Bank of Pakistan (SBP) released on Thursday.


However, the country’s Gross Domestic Product (GDP) has gone up by $2.013 billion to $25.112 billion in July 2015 or current fiscal year, which is around 8.7 percent higher compared to $23.099 billion in July 2014. The current account percent of GDP is still in negative 0.6 percent compared to negative 3.5 percent in July 2014, the SBP data said..


However, the SBP report said that the current account was surplus to $730 million in January-March this year, but it started sliding to negative $534 in April-June 2015.


If compared on month-on-month basis, this deficit was stood at $820 million in July 2014, but the inflows from International Monetary Fund (IMF) and US Support Funds supported the current account of Pakistan in first month of the current fiscal year.


In the first month, the trade balance has also come down to negative $1.794 billion, shrinking by 37 percent compared to last year July figures of negative $2,112 billion. The export of the country remained at $1.760 billion while imports stood at $3.554 billion.


Services exports of the country enhanced to $681 million in the first month, while services imports declined to $591 million, which were stood at $351 million and $734 million in July 2014 respectively, the data said.


In July 2015, the country received an amount of $1.664 billion in the head of remittances, which was stood at $1.659 billion in the same period last year.


The country’s reserves stood at $18.655 billion this week, in which SBP’ reserves stood at $13.615 billion, while banks (other than SBP) reserves are at $5.039 billion.

 

[RiazHaq]

[h=1]India is one of world’s most expensive stock markets[/h][FONT=&quot]At the current forward price-earnings multiple, the valuation for the Indian market is well above its mean[/FONT]
[FONT=&quot]

[/FONT]
[FONT=&quot]

The Indian market is one of the most expensive in the world, immediately after the US, according to estimates from Citi Research. Graphic by Naveen Kumar Saini/Mint[/FONT]
[FONT=&quot]
[/FONT]
[FONT=&quot]
[/FONT]
[FONT=&quot]With the earnings season about to start, the chart illustrates why the fate of the Indian markets depends on the ability of Q4 earnings to beat expectations.
As the chart shows, the Indian market is one of the most expensive in the world, immediately after the US, according to estimates from Citi Research.
At the current forward price-earnings multiple, the valuation for the Indian market is well above its mean.
To be sure, abundant liquidity, both from foreign and domestic investors, has been driving up stocks.
As the outlook for investment in real estate and gold has faded, investors have switched to equities.
But the record shows that markets fell in 2010, 2015 and 2016 from levels only slightly above current valuations. It’s time for earnings to catch up and for investors to be cautious.


http://www.livemint.com/Money/0fhFF...e-of-worlds-most-expensive-stock-markets.html
[/FONT]