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Pakistan attractive as growth outweighs violence: Atlas Asset Management

KARACHI: Atlas Asset Management Ltd., manager of Pakistan ’s best-performing equity fund, said Asia ’s cheapest stock
08 Aug, 2011

 KARACHI: Atlas Asset Management Ltd., manager of Pakistan’s best-performing equity fund, said Asia’s cheapest stock market offers “attractive returns” as the economy grows even with mounting terrorist attacks and political violence.

“I really don’t spend any time worrying about law and order,” said Muhammad Abdul Samad, who oversees $77 million in Pakistani stocks and bonds as chief investment officer at Atlas Asset in Karachi. “If you want to make returns, you have to look at the positives: we have a huge market of 180 million people and the economy is still growing.”

Gains in National Refinery Ltd. NRL, second-biggest oil processor & Attock Petroleum Ltd. APL, a fuel retailer, boosted Atlas’s top fund in the year ended June, Samad told Bloomberg. For fiscal year starting July, it’s seeking investments in banks, oil and gas, and fertilizer industries.

Pakistan’s benchmark stock index, which trades at 6.4 times estimated earnings, lowest in Asia, has fallen 9pc since end of June as escalating violence hurt business confidence. Prime Minister Yusuf Raza Gilani aims to boost economic growth to 4.2pc in the year to June 30, 2012, from 2.4pc in previous 12 months.

Turmoil on global stock markets may prompt the fund to change its asset allocation, increasing cash holdings or preferring defensive stocks with higher dividend yields, Samad said, when MSCI Asia Pacific Index tumbled more than 4pc to cap its worst week since October 2008. “Selling from foreign portfolio investors is affecting local market,” he said.

Last year, global funds bought $344 million worth of Pakistani stocks compared with net sales of $65 million, according to State Bank of Pakistan data. Samad’s Rs 650 million ($7.5 million) Atlas Stock Market Fund outperformed all Pakistan’s 30 equity funds, according to Invest Capital Markets Ltd. The fund returned 40pc in 12 months ended June 30 and beat 29pc return of benchmark Karachi Stock Exchange 100 Index. His top five holdings as of June 30 were Nishat Mills Ltd., MCB Bank Ltd., Pakistan Oilfields Ltd., United Bank Ltd. and Allied Bank Ltd.

“Banks are going to post attractive earnings because if interest rates come down, they will lend more to private sector and if they don’t, they will invest in high-yielding government securities,” Samad told bloomberg, adding that three banks are among his top picks this fiscal year. “Banks are in a comfortable position either way.”

Pakistan’s central bank unexpectedly cut the benchmark interest rate to 13.5pc on July 30, after holding it at 14pc, one of the world’s highest, for four straight reviews.

Samad said investors who “select carefully” can make a return of as much as 30 percent this year because Pakistani stocks are “heavily undervalued. We don’t go for speculation or price momentum and we don’t churn the mix too much. If company is fundamentally strong, it will definitely outperform the market.”

There are 137 funds in Pakistan overseeing Rs 250 billion as of June 30, up 25pc from a year ago, according to Invest Capital, equivalent to 4pc of Rs 5.9 trillion sitting in the nation’s bank deposits.

Samad said Atlas may introduce a government bond fund this year targeting investments of three to five years and is considering a dividend-yield equity fund and a sector-specific stock fund next year. “In short run, law and order problems definitely hurt investors. But in the long run, there’s no impact. And we’re here for the long run.”


Copyright PPI (Pakistan Press International), 2010



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