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Intermarket Pulse: Pakistan Market: Focus on enduring themes

• In the much awaited Panama Leaks verdict, the Supreme Court yesterday ordered the formation of an investigative commission with PM Sharif staying at the helm. The decision triggered a relief rally at the bourse, with the KSE-100 Index gaining 2.3%, on top of the 1.6% return a day earlier.

• With political noising abating for now, attention may come back towards the MSCI EM upgrade and underlying corporate profitability; however, any resurgence in noise may keep a lid on valuation rerating (P/E already at 11.0x; at a modest 11% discount to MSCI EM).

• We retain our Jun’17 Index target of 54,500pts and favor themes that will prove durable across the medium to longer term. These include: (i) construction cycle backed by CPEC (DGKC, CHCC, MUGHAL), (ii) interest rate up-cycle (Big-5 Banks, BAFL, BAHL), (iii) consistent push on exports (NML) and (iv) buoyant consumer demand (PAEL, ISL, APL).