Arif Habib believes PSX will touch 47,000-point level by Dec 2019.
PHOTO: FILE
“We anticipate the Pakistan stock market will touch the 47,000-point level by December 2019,” said Arif Habib Limited (AHL) CEO Shahid Ali Habib at the launch of “Pakistan Investment Strategy 2019: An Offer You Can’t Resist” on Wednesday.
If the market manages to reach the potential level, it will be offering a significant return of 23% in the year compared to Wednesday’s close at 38,307.44 points.
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The market has gone down 14,569 points, or 28%, since touching the all-time high of 52,876.46 points on May 24, 2017. It has dropped 4,139 points, or 10%, since the Pakistan Tehreek-e-Insaf (PTI) formed its government on August 18, 2018.
“The market may remain on a downward trajectory till the IMF agrees on a bailout,” AHL Head of Research Samiullah Tariq said.
Apart from the IMF, Pakistan is expected to receive $19-22 billion in financial assistance from friendly counties and through the sale of Eurobond and Sukuk.
The IMF bailout and the funds from friendly countries and international markets will help address the immediate challenge of strengthening Pakistan’s capacity to make international payments.
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They expected Pakistan to get a bailout of $6-7 billion from the IMF in January. In addition to this, it is anticipated to receive $5 billion from Saudi Arabia, $4-5 billion from China, $2 billion from the UAE and float $3-4 billion worth of Eurobond and Sukuk.
Pakistan will receive another $4-5 billion in project-related loans and get $2.5-3 billion in foreign direct investment. The country will also raise funds through the sale of liquefied natural gas (LNG)-fired power plants in Punjab.
“Pakistan will sell Eurobond and Sukuk after acquiring the IMF bailout as this will help the country float the bonds at comparatively lower rates of return,” Deputy Head of Research Tahir Abbas said.
High remittances, reduction in imports, boost in exports, return of stability to the rupee-dollar parity and the peak in interest rate by March 2019 would help stabilise and expand the economy, he said.
Rs15-17b to be raised at PSX
They expected around eight companies to raise Rs15-17 billion at the PSX through initial public offerings (IPOs), secondary public offerings (SPOs) and getting listed in 2019.
“The high interest rate regime will encourage companies to seek equity financing from the stock market compared to acquiring expensive debt from the banking industry,” Habib said.
The State Bank of Pakistan (SBP) has increased the interest rate by 4.25 percentage points to a six-year high of 10% in the past 11 months. “It may increase the rate to 11% in January 2019,” he predicted.
He said the depressed stock market saw only three IPOs in 2018 during which the newly listed companies raised Rs5 billion.
They said the market was trading below 14-year average price-to-earnings ratio of 9x and is currently offering investors 2019 price-to-earnings ratio of 7.6X.
Exploration and production, banking and fertiliser sectors would be the engine of growth while cement and steel stocks may come under selling pressure.
Published in The Express Tribune, December 13th, 2018.
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