Merrill Lynch has forecast a Pakistan rebound around Asia's markets and advised investors to buy shares in the country, according to the International Herald Tribune. The newspaper quoted a Merrill Lynch report as saying the benchmark in Pakistan is poised to recover from a 29 percent tumble that began in March.
Total returns on the Karachi Stock Exchange-100 Index may be as high as 20 percent over 12 months, as higher oil prices drive Middle East investment and the government sells state assets, wrote Spencer White, chief equity strategist at Merrill.
"High domestic liquidity combined with institutional reforms and recycling of petro dollars continues to provide support for equities," White wrote in his team's first report on Pakistan, dated August 1.
Privatisation remains a "major thrust of the government policy" in Pakistan, the expert noted.
Though the KSE-100 has dropped from its record 10,303.13 on March 15, it remains 18 percent higher this year on optimism that government asset sales will help sustain gains in the nation's shares, the report said.
Pakistan is accelerating the privatisation of companies including Pakistan Petroleum and Pakistan State Oil to help repay $36.7 billion of overseas debt, Merrill said.
Middle Eastern nations, benefiting from crude oil prices near record-high levels, are leading a push to buy telecommunication companies and banks in Pakistan.
Investment from the United Arab Emirates and Saudi Arabia increased five-fold to $49.6 million in the year ended June 30 from a year earlier, according to data from the State Bank of Pakistan.
In June, Emirates Telecommunications, the United Arab Emirates' state-owned phone service provider, beat Singapore Telecommunications and China Mobile Communications for a 26 percent stake in Pakistan Telecommunication with a $2.6 billion bid.
The government plans to sell 51 percent of Pakistan State Oil, the biggest retailer of gasoline, diesel and other fuels, this year. Banks based in the Emirates may also buy into Pakistani lenders, Merrill said.
Banks may merge because the central bank has been pushing lenders to strengthen their capital base. Lenders are required to increase their capital to Rs 2 billion by the end of this year from Rs 500 million in 2000, Merrill said. The KSE-100 comprises 100 companies that make up about 90 percent of Pakistan's market capitalisation, the advisory company said, adding that the benchmark has risen since 2002, gaining more than six-fold in that time.
Even after those gains, Pakistan's stock market trades at 10.6 times this year's estimated earnings, according to KASB Securities data. That is a 25 percent discount to the region as a whole and a 17 percent discount to India, the report said.
Comments
Comments are closed.