Pak­istan is Asia's best per­form­ing stock mar­ket

The Pak Banker - - COMPANIES / BOSS - KARACHI -APP

The re­bound that's helped make Pak­istan eq­ui­ties Asia's best per­form­ers since the end of March isn't done yet, ac­cord­ing to some money man­agers.

The na­tion's cen­tral bank has been among the most ag­gres­sive glob­ally in cut­ting in­ter­est rates this year to cush­ion the econ­omy amid the coro­n­avirus pan­demic. That has re­duced the dou­ble- digit re­turns from fixed in­come and bol­stered the bullish case for eq­ui­ties.

"Given the abrupt fall in in­ter­est rates, lo­cals are still early in their re-allocation from bonds to eq­ui­ties," said Ayub Khuhro, chief in­vest­ment of­fi­cer at Faysal As­set Man­age­ment Ltd., whose as­sets have tripled to 35 bil­lion ru­pees ($210 mil­lion) in the past year. "If rates re­main at these lev­els for some time, they will con­tinue to drive the mar­ket."

Pak­istan's KSE- 100 In­dex is up 36% from the end of March, the best re­bound among ma­jor Asian eq­uity in­dexes for the pe­riod. A slow­down in the rate of new in­fec­tions cou­pled with mea­sures to boost an econ­omy that shrank for the first time in seven decades prompted the Dubai-based FIM Part­ners in July to make Pak­istan its big­gest ex­po­sure af­ter the Philip­pines.

"I see Pak­istan be­com­ing our largest ex­po­sure in the next six months," said Mo­hammed Ali Hus­sain, re­search head at FIM Part­ners, which man­ages $1.6 bil­lion. "Even af­ter the re­bound, there's room for rerat­ing as­sum­ing the macro pic­ture re­mains on track," he said. In dol­lar terms, the KSE-100 In­dex is still down more than 50% from its life­time high reached in May 2017, he said.

Tun­dra Fon­der AB, the Stock­holm-based money man­ager known for its early bet on Pak­istan, said the na­tion has the largest allocation in its fron­tier fund.

"Covid-19 in­ter­rupted ev­ery­thing but our ar­gu­ment from July last year that the next four-five years should be very good for Pak­istani eq­ui­ties is valid," said Chief

In­vest­ment Of­fi­cer Mat­tias Martins­son. "Given the low for­eign ap­petite for emerg­ing and fron­tier mar­kets, it re­mains to be seen if foreigners par­tic­i­pate."

So far, over­seas funds aren't join­ing their lo­cal peers in buy­ing the na­tion's shares. They've pulled a net $346 mil­lion this year, mir­ror­ing with­drawals seen in big Asian mar­kets ex­clud­ing China.

A year af­ter win­ning a $6 bil­lion In­ter­na­tional Mone­tary Fund loan to fend off a bal­ance-of-pay­ments cri­sis, Pak­istan sought an­other loan to fight the fall­out of the pan­demic. The na­tion faces the risk for a resur­gence in in­fec­tions, which can stall eco­nomic re­cov­ery.

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