Arif Habib Limited (AHL) holds a bullish view of Pakistan's equity market and anticipates generation of a total return of 20 percent during 2018, with the KSE-100 index expected to reach a level of 47,200 points by December 2018. AHL released its Annual Investment Strategy Outlook document on Tuesday for the year 2018.
The upside potential in the Pakistan Stock Exchange (PSX) is primarily premised on prevailing attractive valuations in the market (KSE-100 is trading at a 5-year low PER of 8.5x and at a 46 percent discount to its regional peers). Samiullah Tariq, Director Research & Business Development, AHL said, "Diluting political noise, commencement of a high Economic Growth period (FY18-20 average GDP growth expected at 6.0 percent compared to past 5-year average of 4.4 percent), low interest rates (FY18-20 average discount rate is expected at 6.75 percent, compared to past 5-year average of 8.64 percent) and strong domestic liquidity lend further conviction to our healthy outlook for the domestic equity bourse."
AHL favoured sectors for 2018 include banks, whose healthy profitability outlook is hinged on interest rate up tick and strong loan growth, followed by E&Ps (Exploration and Production) which is likely to benefit from rising oil prices globally and PKR depreciation along with hydrocarbon production growth. Other favoured sectors include Autos (government priority to favour domestic industry and strict import controls deemed positive), Steel (capacity accretion, diversification and pricing power remain key themes) and Cements (robust demand amid infrastructure expenditure to bode well).