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`High-Risk Hunters' Push Pakistan Stocks to Top Start in Decade

Foreign investors are snapping up Pakistani equities again.

`High-Risk Hunters' Push Pakistan Stocks to Top Start in Decade
A man reads a newspaper in the trading hall at the Karachi Stock Exchange (KSE) in Karachi, Pakistan. (Photographer: Asim Hafeez/Bloomberg)

(Bloomberg) -- Foreign investors are snapping up Pakistani equities again.

Global funds have bought $91 million of the nation’s shares in January, set for the biggest monthly inflow in almost four years, as they pile into risk assets around the world. That’s helped propel the KSE100 Index to its best start to a year since 2007, rebounding from a selloff that made Pakistan the worst stock market globally last year.

“This is just the high-risk hunters who are willing to bet at the beginning of the year,’’ said Aah Soomro, Karachi-based senior advisor at Tundra Fonder AB, which manages $350 million in equities and has been a buyer of Pakistan’s stocks this month. “The correction had been too steep.”

`High-Risk Hunters' Push Pakistan Stocks to Top Start in Decade

The resumption of inflows into Pakistan reflects the euphoria that’s engulfed markets, even as major gauges flash overbought signals. Emerging market stocks took in $8.1 billion in the week to Jan. 24, the second-biggest amount ever, amid bets on broadening global economic growth, Bank of America Merrill Lynch said in a research report, citing EPFR Global data.

Political turmoil following the ouster of former Prime Minister Nawaz Sharif and widening deficits led to $494 million of stocks outflow last year even as the country was restored to emerging-market status by MSCI Inc. Measures to repair the economy before elections in July -- an unexpected hike in interest rates last week and the devaluation of the rupee in December to bolster foreign-currency reserves -- are helping revive investor sentiment.

“The currency has been devalued a bit already and even though there might be another devaluation later this year, it shouldn’t be massive,” said Hertta Alava, head of emerging markets at FIM Asset Management Ltd. in Helsinki. More funds are waiting on the sidelines until the July polls are done “because in many other countries we’ve seen that election outcomes can be surprising,” she said.

About half of this year’s inflows have come from index-tracking funds and the remainder from investors who’ve made money in Pakistani stocks previously, Ovais Ahsan, head of broking at Optimus Capital Management Pvt., said. The KSE100 Index has risen in seven of the nine years since the nation was reduced to frontier in 2009.

“When global investors make money in stock markets, they never forget and always come back,” said Ahsan.

--With assistance from Srinivasan Sivabalan and Cormac Mullen

To contact the reporter on this story: Faseeh Mangi in Karachi at fmangi@bloomberg.net.

To contact the editors responsible for this story: Tomoko Yamazaki at tyamazaki@bloomberg.net, Christopher Anstey at canstey@bloomberg.net, Ravil Shirodkar, Andrew Janes

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