| LONDON, June 6
LONDON, June 6 Political uncertainty, occasional
bomb blasts and border militant insurgency do not stop Pakistan
being a good investment destination, one of the first funds to
target the country says, comparing the economy to a smaller
The Melchior Selected Trust Pakistan Opportunities Fund,
launching this month and aimed at ultimately reaching some $200
million in Pakistani equities, says the country has been poorly
portrayed and its economic fundamentals remain appealing.
"We believe Pakistan has been treated unfairly by the
international media," David Graham, partner of fund manager
Dalton Strategic Partnership.
Pakistan's immediate political future remains uncertain
after parties supporting President Pervez Musharraf were
defeated in an election while Al-Qaeda this week claimed
responsibility for Monday's suicide car bomb attack on the
Danish Embassy in Islamabad that killed six people.
"In looking at the Pakistan market, we see many similarities
with India," Graham said, noting Pakistan had been described as
"India at half the price".
Along with China, India has attracted vast fund volumes from
emerging investors in recent years.
Despite political problems including the assassination of
former prime minister Benazir Bhutto late last year, Graham said
the economy continued to grow at 7 percent year-on-year fuelled
both by its own domestic demand as well as inflows from the
Middle East -- which has itself benefited from record oil
Graham said 3 million Pakistanis worked in the Gulf
economies, sending money home and further fuelling the economy.
He said the country was in some ways a safer and more
established bet than some other "frontier markets", which have
benefited this year from investors seeking to move beyond more
conventional emerging destinations.
The Karachi stock exchange .KSE is down 6.7 percent so far
this year, but the fund said it expected to see good prolonged
"Notwithstanding the strong rise in the market over the past
six years, the Karachi stock market is poised to benefit from
the continued growth in the economy," said Naz Khan, chief
executive officer of KASB Funds in Karachi which is advising
"We like the energy and banking sectors and fertiliser,
chemicals and cement should all do well."
He said Pakistan already produced some 30 percent of its own
energy requirements and this was set to grow with new
The young population of 160 million was increasing their
personal debt from a low base, boosting spending power and
increasing demand for mobile phones, cars and other goods.
Karachi Stock Exchange was one of the world's least
correlated with markets in the United States, he said, providing
good diversification from any Western economic downturn.
Khan said there was no reason to be particularly concerned
by ongoing tensions along the border with Afghanistan, where
Pakistan had fought intermittent battles against the Pakistani
"We have locked horns with India many times along the border
with them in the last few decades," he said.
"This is just a different border and it shouldn't affect the
(Editing by Gerrard Raven)