Pakistani bonds best for investment during current year

Pakistan, wracked by a war with Taliban insurgents and a record current-account deficit, is this year’s best bond investment, according to JPMorgan Chase & Co. indexes. Money managers say the stock market, the region’s cheapest, may be next.

Dollar-denominated debt sold by Pakistan returned 86.4 percent so far this year, more than any of the 45 emerging markets tracked by New York-based JPMorgan and 19 developed countries followed by Merrill Lynch & Co. Shares in the Karachi Stock Exchange 100 Index trade at 9.6 times reported earnings, the lowest in Asia excluding Japan, after the gauge rose 21 percent in 2009.

Pakistan’s economy deteriorated in the past year as terrorist attacks led investors to sell a net $1.1 billion of stocks in the 11 months ended May 31, compared with purchases of $87.2 million of shares a year earlier, according to the central bank. Government forecasts for 3.3 percent economic growth in the year starting July 1, a bailout by the International Monetary Fund and equities trading near the cheapest levels in at least four years are making the country more attractive.