Karachi stocks may gain 23% by year-end

KARACHI: Pakistan’s stocks, the cheapest in Asia, may advance 23 per cent in the next eight months, buoyed by overseas funds and improved company earnings, according to the National Investment Trust Ltd.

“All the fundamentals indicate that the market will pare most of its losses of the past two years” and reach 13,000 by end-December, Manzoor Ahmed of NIT said in an interview on Thursday. He manages the equivalent of $857m as head of asset management at state-owned National Investment Trust, Pakistan’s largest equity fund.

“The economy is in a good recovery phase.” Pakistan’s benchmark Karachi Stock Exchange (KSE) 100 Index trades at 8.75 times the future earnings, the lowest in Asia. The KSE-100 rose 0.5 per cent to 10,589.26 as of 12:13 pm on Friday, from Thursday’s close of 10,533.57. Still, it is 41 per cent lower than its record in April 2008. Oil companies, power generators and lenders may lead gains in stocks this year, said Ahmed.

The KSE-100 index sank as much as 69 per cent from its peak after the bourse restricted trading for four months from August 2008 to prop share prices up. The gauge has climbed 13 per cent this year, extending last year’s 60 per cent advance as overseas investors bought more equities in South Asia’s second-largest economy.

Gross domestic product (GDP) may grow 3.4 per cent in the financial year ending June 30, after a 2 per cent gain in the previous year, according to the finance ministry. Inflation, Politics Stock gains may be limited if accelerating inflation prompts the central bank to raise borrowing costs.

While a struggle between the nation’s top politicians, President Asif Ali Zardari and opposition leader Nawaz Sharif, a former prime minister, may limit the government’s ability to implement policies aimed at buoying the economy, Ahmed said. Foreign investors bought net $176.6m of Pakistan stocks between January 1 and April 8, after selling a net $237.4m in the same period last year, according to stock exchange’s National Clearing Company of Pakistan Ltd.

The KSE-100 Index plunged 58 per cent in 2008, its first annual decline since 2001. Pakistan needs to expand at an average 6 per cent over the next five years to cut poverty, according to the government.