EUR 4.42 For Business Accounts Only

Intermarket Pulse: Pakistan Market: July’17: Politics stalled market activity

The Pakistan Market shed 1.2% in Jul'17, amid growing anticipation over the Panama case decision by Supreme Court. Activity at the bourse shrank drastically, with average daily traded value/volume falling about 30% MoM to US$87mn/175mn shares. Foreign outflows during Jul'17 amounted to US$38mn, though concentrated in the last 2 days.

Politics took center stage. Supreme Court decided to disqualify the PM and refer his case to NAB. This, however, was followed by a swift transfer of power to his brother, Shehbaz Sharif. On the macro front, FY17 C/A deficit swelled to US$12bn (4% to GDP).

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The market is now trading at a forward P/E of 10.1x (26% discount to the EM), where a shaky top-down and lack of fundamental triggers might keep the market range-bound near term. We advocate stock-picking with focus on defensive attributes (high DY and a natural hedge to the exchange rate).