The share prices of top 100 companies at the Pakistan Stock Exchange (PSX) are estimated to rise by an average of 25%, taking the benchmark KSE-100 index past the 55,000-point level by December 31, 2022.
Besides, the bourse is expected to welcome eight new companies and list their shares for trading in the next year. These companies are estimated to raise equity capital worth around Rs14-15 billion through initial public offerings (IPOs) in 2022.
“The bourse may see the single largest IPO (initial public offering) from construction industry in the private sector if stock market performs well in line with the expectations,” Arif Habib Limited (AHL) CEO Shahid Ali Habib said at the launch of ‘Pakistan Strategy 2022 - A Delicate Balance’ on Friday.
He recalled that listing of Air Link Communication (ALC) became the single largest IPO in history of the Pakistan Stock Exchange as the company raised investment worth Rs6.43 billion by selling 90 million shares in August 2021.
According to AHL Head of Research Tahir Abbas and Economist Sana Tawfik, the stock market is expected to perform well during 2022 following stabilisation of macroeconomic indicators such as inflation and current account deficit from February 2022 onward.
The expected drop in international commodity prices like crude oil would support normalisation of macroeconomic indicators and besides, the State Bank of Pakistan (SBP) is expected to cut the benchmark interest rate to 9.25% by December 2022, they added.
The benchmark KSE-100 index has so far improved by net 1% during the outgoing calendar year 2021 and closed at 44,118 points on Friday, according to Topline Securities.
Read Market watch: KSE-100 erases gains, closes week in red
The experts projected that inflation reading would peak out in the range of 13-14% in January 2022 and start declining from February.
The current account deficit would remain high till January and begin contracting from February onward. The full current fiscal year 2022 deficit is estimated at 4.8% of gross domestic product (GDP), or $15.3 billion, against central bank’s revised projection of 4%.
The benchmark interest rate would peak out at 10% in March 2022 and fall to 9.25% by December 2022, Tawfik projected.
“The economy is projected to grow 5.17% in FY22, compared to 3.94% in FY21.”
The rupee is estimated to hover at current level of Rs178 against the US dollar by the end of June 2022, however it is projected to devalue to Rs183 till the end of December 2022.
The completion of the International Monetary Fund (IMF) loan programme worth $6 billion in September would give the central bank and the government some space to take pro-growth measures. “This will support the stock market to grow as well,” Habib said.
Foreign exchange reserves are projected to increase by a net $1.27 billion to $27.5 billion by the end of June 2022.
Talking about inflation, the experts calculated that an “increase of $5 per barrel in international oil price pushes inflation by 27 basis points (bps)”.
Sectoral outlook
With regard to the exploration and production sector, the research house predicted resolution of gas circular debt and stability in international oil prices. Moreover, it said that depreciation of the rupee against the US dollar would keep this sector in limelight.
In the banking sector, it projected significant growth in deposits citing that jump in interest rates would keep the sector’s earnings upbeat.
It said that cement sector would witness pricing discipline coupled with growth in domestic dispatches, reversal in international coal prices and higher public sector development programme (PSDP) allocation that will stimulate the bottom-line of cement companies.
In the steel sector, it said that significant pricing power, strong recovery in demand with no threat from imports and inventory gains will escalate earnings.
In textile segment, it projected continuous growth in export orders amid government incentives for export-oriented sectors and expected margins to remain upbeat.
And for automobiles, it projected that strong pricing power, higher duties on CBU (completely built up) units and robust demand amid economic growth would augment automobile sales.
Published in The Express Tribune, December 25th, 2021.
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These wild market forecasts have 60 p.c. chance of not happening.