Pakistan has been the staging area for numerous terrorist attacks in the recent years and might seem to be an unstable country. Yes, in the recent years, Pakistan’s equity market has been outperforming China’s and India’s markets by leaps and bounds.
Pakistan’s Equity Market:
Even though this might come as a surprise to many, this isn’t as shocking as it seems. Despite seeming to be an unfit country to put your money in, Pakistan’s equity market is thriving and has surpassed that of China’s and India’s – seeing as Pakistan’s ETF was up 20% in the last twelve years and it surpassed India and China. Pakistan does lag behind both countries in other macroeconomic factors like GDP and unemployment, but not in the equity market.
The reason behind Pakistan’s market being better than China’s and India’s is because, first of all, terrorism has nothing to do with financial markets – unless it disrupts trade, which has not been the case in Pakistan. Another reason for having a better market is that Pakistan is not an emerging market but a frontier market – and even though frontier markets have their ups and downs with one year’s big winners instantly losing and becoming losers the next year, Pakistan’s markets are stable enough to entice investors.
A huge reason is the vote of confidence that Pakistan’s market has been getting from foreign investors, with $1 billion dollars in support from the World Bank and the acquisition of K-Electric by Shanghai Electric Power Co.
According to the Forbes Article
The fact that Chinese markets have been destabilized because of strict government reforms and the fact that even though Indian market reforms have been stable but execution is troublesome only adds to the allure of Pakistan’s markets for foreign investors.
Where Chinese and Indian markets are scaring away foreign investors due their own different problems, Pakistan’s equity market is thriving and attracting foreign investors due to its excellent reforms and stable trade despite all odds.