Pakistan Strategy: Jun’18 - All eyes on elections & measures for macro stability
- 2018 has turned out to be a disappointing year for Pakistan equity market with first negative return since 2009 of 10% (26% for USD). The upgrade of Pakistan’s market to MSCI EM status has failed to live up to expectations with outflow in Foreign Institution Portfolio Investment (FIPI) of USD289mn, a third consecutive year of outflow.
- The uncertainty on politics and risks to macro stability and corporate earnings growth has dragged the market performance in FY18. A key highlight of Jun’18 was positive progress on much-anticipated Amnesty Scheme for assets declaration.
- The monthly local liquidity flows do not portray a very different picture. Insurance once again emerged as the only savior and invested USD55mn in Jun’18 or one fourth of total inflows during FY18.
- Politics and macro have emerged as two major drivers of stock returns in Jul’18 and beyond. A significant increase in petroleum product prices (+6-14% MoM) has raised expectations of similar unpopular, but important measures, in order to address the risk to macro stability in near-term.
- Jul’18 promises to be an eventful period with elections set to take place on 25th-Jul’18. General cautiousness may prevail with another month of range-bound activity amid potentially low volumes. Our top five picks are: PPL, MCB, EFERT, HUBC and NCL.
BMA is amongst the leading financial groups in Pakistan. BMA Capital’s core areas of business include Capital Markets, Corporate Finance & Advisory, Asset Management, and Financial Products Distribution. BMA Capital is the leader in privatisation advisory in Pakistan, having successfully advised on over 50% of all privatisations in Pakistan, by value, in transactions valued in excess of US$4 billion. Recent transactions include joint lead managing the $813 million GDR Offering of 10% of OGDCL on the London Stock Exchange in 2006-07, and advising Etisalat on their successful acquisition of a 26% strategic stake in Pakistan Telecommunications Company Limited (PTCL) for US$2.6 billion, the largest M&A transaction and foreign direct investment in Pakistan’s history. The firm is among the top brokers in the Pakistan equity and treasury markets, and is among a handful of firms that comprehensively cover all segments of the capital markets. This is supported by a very strong and independent research capability, which is quoted regularly in both local and international media. BMA Capital’s retail brokerage brand, BMA Trade, has launched a nationwide network of branches as well as a comprehensive online trading platform, enabling investors across Pakistan to take part in the capital markets.
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