EUR 3.54 For Business Accounts Only

Pakistan Market: Jun’17: Steep decline following MSCI upgrade

• The Pakistan Market shed 8% in Jun’17, similar to the UAE/Qatar markets in the immediate month following their own EM upgrades. So far, the Index is down 3%CYTD; in comparison, the MSCI EM and FM indices are up 18% and 13%.

• On politics, the Supreme Court has ordered the JIT to submit the final report by July 10. On the macro front, Pakistan’s external account continue to weaken, but fx reserves were shored up by US$1bn from fresh borrowing.

• Going forward, however, we believe the recent weak market performance has opened up valuations nicely including in blue-chip names. At current levels, we prefer MCB, APL, MLCF, INDU and MTL. On the flipside, HASCOL and HCAR are among least preferred. Broader risks emanate from politics and falling Fx reserves.