EUR 4.64 For Business Accounts Only

Intermarket Pulse: May'17- Heavy activity on EM inclusion; attractive valuations on offer

• The KSE-100 was volatile in May, it gained 6.3% in the first 2wks and shed 3.4% in the last 2wks, to close 2.6% higher for the month. Interestingly, the market was weaker after the final list of MSCI EM constituents was announced as profit taking came into play.

• The FY18 Budget and MSCI rebalancing were key checkpoints for May. While the federal government attempts to maintain a balance between populism and fiscal discipline, rebalancing flows surprisingly resulted in a net sell. This could potentially subdue investor sentiments in the immediate-term, although Pakistan’s underperformance vs. the EM space this calendar year may prevent a large fall.

• Going forward however, we believe the recent weak market performance has opened up valuation nicely including in blue-chip names. At current levels, we prefer MCB, UBL, AICL, CHCC, APL and NML. On the flipside, we have Sells on HASCOL, HCAR and AGTL. Broader risks emanate from politics and falling Fx reserves.