EUR 4.42 For Business Accounts Only

Pakistan Strategy: KSE-100: 50,000 is the new 60,000

• With the PML-N government still intact, the swift decision to nominate current Punjab CM Shehbaz Sharif for Prime Minister (after a transition period) will likely lead to a relief rally in the KSE-100, continuing the reversal that saw it recover 3.8% from its intraday low on Friday.

• However, political and macroeconomic challenges remain; PTI will be seen to benefit in the next elections particularly if some electables switch parties. PML-N will likely adopt a populist agenda over the next 6-9m but the external a/c needs to be managed very carefully. It is difficult to see any party attaining the dominance PML-N achieved in 2013 and a coalition government could be on the cards in 2018.

• We believe market P/E (10x) is higher than what consensus is reflecting while there is room for cuts in our projected 23%YoY earnings growth for 2018. We think FY18 will be a stock pickers' market and it is better to focus on individual stocks than the broader Index. Some sector rotation could also come into play, with E&P, Fertilizer, Power and Textile back in the limelight.