Wednesday, June 24, 2009

Pakistan: The Best bond investment this year |JP Morgan|

Looking for a new emerging market? Try Pakistan! Despite a continued sense of tension with India and open hostility along the Afghan border, the country's bond market is the best in the world, according to data from JPMorgan Chase & Co. (NYSE: JPM). Debt sold by Pakistan has surged 88% this year -- topping the 45 emerging markets that JPMorgan watches and the 19 that Merrill Lynch & Co. (NYSE: BAC) follows.

And, the stock market may be next.

Money managers, according to a report by Bloomberg, believe that the Pakistani equity market could become the next global superstar. The Karachi Stock Exchange 100 Index is only trading at 9.6X earnings, making it the lowest in Asia (excluding Japan) . . . and this follows a 21% increase year-to-date.

Equities are cheap as a result of such factors as terror attacks and a net sell-off of $1.1 billion in equity securities for the 11 months ending May 31, 2009 (compared to net purchases of $87.2 million the year before). But the Pakistani government expects 3.3% economic growth for the year to kick off on July 1, 2009. An International Monetary Fund bailout and equities sitting at their cheapest levels in four years set the stage for a surge (and not Iraqi-style).

The worst may be in the rear-view mirror, but there are plenty of reasons to be nervous. In the past seven weeks, the country has been hit by more than 25 bombings said to be from Taliban efforts. Shortages abound, according to the Red Cross.

Yet, this is the raw material of opportunity, the crossroads at which spikes and plunges are determined. Lurking in the background, as always, is the notion that Pakistan may be considered "too strategic to fail."

Originally Published here



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