Pakistan Strategy : KSE100 below 30,000- what next?
The KSE-100 index breached the 30,000 psychological support level this week and trading at forward P/E of 5.4x which is ~10 year low.
The recent bearish market spell is due to ongoing regional tensions with India along substantial selling by institutional investors triggered by shift in asset allocation in favor of fixed income (MFs net sold USD174mn in CY19TD vs. 11.9 net sold in CY18).
On the bright side, Pakistan’s relations with the US have shown signs of improvement whereas the macro side is not bereft of positive developments (steep drop in Jul’19 trade deficit, lower than expected CPI, etc.).
In the face of negative sound bites from market participants, we maintain our constructive view on the market and argue for re-rating of market multiple to a modest 7x which is in-line with Pakistan’s average P/E multiple in past IMF programs.
Key risks include; (i) further escalation of tensions on the border, (ii) higher than expected interest rate hikes, and (iii) Pakistan being placed in FATF blacklist.
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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