EUR 4.36 For Business Accounts Only

Intermarket Pulse: Pakistan Market: Feb’18: Outperformed amidst a global rout

• The Pakistan Market could not sustain its strong start to the year in Feb’18, losing 1.8% after 8.8% gains in Jan’18. Political noise and negative macro developments combined to take the market lower. Despite results season, investor sentiment was subdued, resulting in ADTO of US$75mn vs. US$95mn in Jan’18. That said, Pakistan outperformed major global markets many of which were down > 5% in Feb.
• The negative local sentiment was compounded by FPI outflow of US$32mn in Feb’18 after net inflow of US$86mn in Jan’18, even as our recent UK/US roadshow indicates Pakistan can be a good contrarian play for 2018 given volatile global markets. Major outflow was seen in Banks (US$21mn), E&Ps (US$10mn) and Fertilizers (US$6mn). 
• We expect the KSE-100 to remain range-bound in the near-term where we advise a selective, cherry picking stance. Key themes to play are rising interest rates, weak PKR and growing exports, and commodity price upcycle; cyclicals on the other hand are least preferred. Our top picks are BAFL, PSO, ENGRO, HUBC and ASTL.