EUR 3.72 For Business Accounts Only

Intermarket Pulse: Pakistan Market - Steep post-upgrade rout; valuations will provide support

• In its worst day since Aug’15, the KSE-100 shed 3.6% yesterday (adjusted close; it was down 4.4% at 2pm). Strong selling pressure was again witnessed from foreign investors (net: -US$16.5mn) while Individuals were buyers again. Local mutual funds appeared to largely stay on the sidelines.

• Going by the UAE/Qatar markets, which shed 5% in the first 2wks after upgrade and were weak throughout Jun’14, the Pakistan market was expected to ease off post upgrade as well. Given that the market has already corrected by 7.6% from its all-time high, we believe further downside is limited. The GCC markets mentioned above rallied strongly in July, and this could occur for Pakistan as well.

• ased on available data (since 2006), market capitalization of the KSE-30 Index relative to the KSE-100 is the lowest it has ever been. Put differently, blue chips are now appearing very attractive relative to mid- and small-caps. We see the market finding its bottom soon, with recovery to be led by value buying in Index heavyweights, particularly the large Banks.