KARACHI, Jan 29: During the first month of the calendar year 2008, shares on Pakistan’s stock markets gave out a negative return of 1.39 per cent.

Bad as that may sound, investors should take heart and be comforted by the knowledge that the KSE losses almost fade into insignificant in comparison to the rout in the global equity markets.

During January and mainly in the week that went past, which probably would be remembered as the worst period for the world markets in a quarter of a century -- Japan’s Nikkei plunged by huge 14.50 per cent , making the market one of the poorest performers to date this year.

As waves of selling drowned markets both in the advanced and emerging markets, US Dow tripped by 6.6 per cent. Even that was a lighter blow, as all other major markets dipped in double digit losses.

Hong Kong’s Hang Sang was down 13.52 per cent; Singapore’s Straits Times by 12.67 per cent; UK’s FTSE by 10.35 per cent and US Nasdaq by 11.40 per cent.

Given the collective habit of comparing with all things Indian, and at most times to belittle the motherland, skeptics for once might be silenced by India’s BSE-30 fall of 10.52 per cent, which was more than 10 times deeper than Pakistan’s KSE-100 index.

The previous Tuesday, US Federal Reserve slashed interest rates by 75 basis points to 3.5 per cent, in an effort to stem the market rot. The cut came after the second day of heavy losses in the Asian markets. Nikkei accumulated its two-day decline of five per cent, its the greatest fall in nearly two decades; Shanghai closed down 7.2 per cent; Hong Kong fell 8.7 per cent and Mumbai five per cent the first two days (Monday and Tuesday) of last week.

But for all that, uncertainty still looms large on the global markets over possibilities of stunted growth in world economies, prompted by fears of a recession in the US. Two major reasons that the Pakistani equity markets ‘outperformed’ other markets during the world market meltdown, were identified by analysts as: (one) other markets were trading at extremely high values compared to the already discounted prices at KSE and (two), that foreign investors whose flight accentuated fall in emerging markets had little impact on the Pakistan market.

“Since January, the foreign investors have withdrawn as huge an amount as US$100 million from the KSE,” say analysts, reminding that ten years ago when such an eventuality had occurred, it had pulled the KSE-100 index down to the bottom of the pit at 750 points.

“The selling by foreign investors has been successfully absorbed by local players, which include mutual funds and institutions, which is why a larger fall has been averted,” say equity traders.

But while the worries over the ongoing period are enough of a burden for investors, certain stock brokerage houses are arguing over the 40 per cent return provided by the KSE during CY07.

Assisted by formulas complex for an ordinary investor to understand, some analyst are comparing “risk-adjusted return by employing Sharpe Ratio”.

On the basis of that theory, only ten, out of 41 scrips, are identified as having outperformed the KSE index. And a few scrips provided negative ‘risk adjusted return on Sharpe Ratio’ basis, which otherwise were thought to have given out something of a return in the positive.