According to a news report appearing in Bloomberg, Pakistan is a frontier market, which means it is less developed, less liquid and less stable than the emerging markets. The report adds that frontier markets are those hoping to someday graduate to emerging-markets status, as Qatar and the United Arab Emirates did last year. They can produce big returns, and big losses. Many refer to them as “pre-emerging.” This is where Brazil and China were in the 1990s.
As a matter of fact, the western media is habitual of mentioning positive aspects of Pakistan with tinge of negativity. Where the report says that the Pakistani market has decent long-term prospects because of a young labour force, increased trade and infrastructure projects with China and policy of privatisation, it does not forgot to mention alleged stay of Osama bin Laden in the country. The report says that Pakistan has a population larger than Russia’s, but its economy is about the size of Ireland’s, and its stock market — capitalized at $46 billion — is roughly the size of Greece’s. As with most developing-market exchange traded funds, Pakistan’s holdings come largely from the financial, energy and materials sectors. The report also says that one attraction of frontier markets to investors is that the stocks tend to move independently of the US market, helping diversify a portfolio. Pakistan’s stocks have no correlation with the Standard & Poor’s 500-stock index, about the same as gold. Compare that with emerging markets, which move with the US about 70 percent of the time. Still, individual investors would probably never own enough of a frontier market to take full advantage of that benefit. This is why Pakistan may be a better tool for a professional money manager or an institution than for a retail investor.
As it is earlier mentioned, the positive aspects about the country’s economy are highlighted in a discouraging negative connotation. Pakistan is a rich country if lifestyle and standard of living of the people is concerned as compared to the countries in the region. The divide between rich and poor is very small in contrast to India where the rich are the richest and the poor are the poorest. The Pakistani economy and stock are independent of the world economic shocks and aftershocks. Whether it was the Asian crisis in 1994 or the world recession in 2008, the Pakistani economy is least affected by both the crises. The Pakistani economy is resilient and independent of the world financial ploys, gambits and exploitation; therefore, it is largely unconcerned with Standard & Poor’s index and New York stock Exchange. Pakistan is the best place to invest money as China is doing right now.
