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Equity market offers attractive dividend of 7%: NIT chief

Staff Report

KARACHI: Pakistan equity market offers one of the highest dividend yields of seven percent for current fiscal year.

Returns in the capital market are closely linked to the economic perception of the country and stock markets sometime overreact on the slightest threat to the economy, Chairman National Investment Trust (NIT), Tariq Iqbal Khan stated this at a road show on Capital Market Investment jointly organized by NIT and Central Depository Company (CDC) on Saturday.

He said that the decline in stock markets during past 16 months was not exactly in line with the economic downslide.

He added that reviving economy offers great opportunities for the investors as the equities at Karachi Stock Exchange are being traded at 50 percent lesser rates, the corporate sector results are encouraging and profit to equity ratios are on the rise.

Chairman NIT said that KSE provided investors average yearly return of 21 percent during the decade 1999-2009 while the average inflation during this period was 7.2 percent.

He said market capitalisation of 19 percent of the GDP is much lower than its peak of 32 percent of GDP in 2008. He said foreign portfolio investors have acknowledged this opportunity and has committed $225 million in first quarter of this fiscal compared with outflows of $171 million during corresponding period last year.

He said major risks to the equity market are raising oil and commodity rate. He added that apprehensions about possible increase in budget and trade deficit, and return of high inflation are also some risk factors along with political uncertainty, deteriorating law and order situation, energy shortage, corporate circular debt.

However, he added, Pakistan’s emerging debt market offers lucrative opportunities for the investors. Currently the bond market in Pakistan is only 7 percent of its GDP compared with global average of 109 percent of GDP which shows the great potential in this regard. He said introduction of bond trading terminal by the end of 2009 will provide liquidity and depth to the bond market. He cautioned that debt market is not averse to risks like liquidity, investment and price risks while credit, inflation and regulatory risks cannot be ruled out as well.

Earlier, while briefing the audience about CDC’s initiative to organize such events Mr. Bashir Jan Mohammad, Chairman CDC said that investment in stock market would be very rewarding in the current reviving economy and the purpose of such road shows is to appraise potential investors about the benefits and risks of the investment in capital market, and to remove misconceptions associated with stock market investments.

He said that CDC provides depository services to a wide range of Capital Market participants which includes Brokers, Asset Management Companies, Banks (including Custodian Banks) and general retail investors.

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