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With Growing Ties To China, The Pakistan ETF Is Worth A Look

One country that cannot escape mention as it pertains to the “war on global terror” is Pakistan, and today we decided to delve into the lone tracker of the country’s equity market in ETF land known as PAK (Global X MSCI Pakistan, Expense Ratio 0.88%, $12.1 million in AUM).

PAK launched back in April of 2015, so by ETF standards is still a relatively young fund in terms of its tenure, and currently it trades about 33,000 shares daily on a one month-trailing basis (which is nearly double the level of trading volume in the fund on a three-month trailing basis of 18,000 shares). PAK tracks the MSCI All Pakistan Select 25/50 Index and being a “Frontier” market, one might expect the public equity securities listed to be relatively unknown companies, at least on a global basis.

Such appears to be the case here in Pakistan, as we presently see thirty-eight listed public companies owned within the fund, with top holdings as follows: 1) Habib Bank (8.7%), 2) Lucky Cement (8.4%), 3) MCB Bank Ltd. (7.9%), 4) United Bank Ltd. (6.75%), and 5) Oil & Gas Development Company (6.3%). It should be noted that all of the securities owned within PAK are ordinary shares listed overseas and not ADRs, as one might also expect given the Frontier market nature of the country.

For the ordinary investor, liquidity constraints, prohibitive trading costs as well as odd market hours in Pakistan would likely make investing in the country impractical if not impossible, so PAK’s listing in 2015 was well-timed for those looking for specific country exposure here. One might note that Pakistan’s neighbor India has a grand total of eleven ETP offerings in the space currently (the largest being the $3.6 billion INDA (iShares MSCI India, Expense Ratio 0.68%), so there is likely room for growth here in Pakistan over time.

From an investment case standpoint, fund literature suggests “Favorable Demographics” in Pakistan, specifically stating “In addition to being the 7th most populous country in the world with over 199 million people, more than 54% of Pakistan’s population is under the age of 25.” Additionally, “China is expected to invest close to $46.6 billion towards infrastructure investment in Pakistan over the next 6 years. The countries have come together to create an ‘economic-corridor,’ to undertake projects like building an oil pipeline, and improving rail and road links.”

The Global X MSCI Pakistan ETF (NYSE:PAK) was trading at $17.94 per share on Friday morning, down $0.06 (-0.33%). Year-to-date, PAK has gained 2.51%, versus a 3.41% rise in the benchmark S&P 500 index during the same period.

PAK currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #45 of 78 ETFs in the Emerging Markets Equities ETFs category.

Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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