Pakistan market is expected to continue its uptrend in 2017 given tangible gains from China Pakistan Economic Corridor (CPEC) projects and rising domestic demand leading to higher economic growth prospects, analyst said. This coupled with liquidity with local investors will likely set the stage for further gains in 2017.
A research report of Topline Securities said Pakistan market currently traded at 2017F PE of 9.6x, which is at 23 percent and 29 percent discount to Morgan Stanley Composite Index (MSCI) Frontier Markets (FM) forward PE of 12.4x and MSCI Emerging Markets (EM) forward PE of 13.6x, respectively.
"We are of the view that Pakistan Market PE can potentially re-rate to 10x in 2017", the report said. This would be in line with the PE witnessed during high growth period of 2005-08 when Pakistan was part of EM index. "We expect benchmark KSE-100 Index to rise to 56,000 points by December 2017 generating 21 percent returns (inclusive of dividend)", the report said.
Topline sample companies' profit (representing 70 percent of KSE-100 index) is expected to grow by 23 percent in 2017, compared to increase of one percent in 2016, due to re-bound in oil prices and higher oil production, bottoming out of interest rates, higher sales of oil, fertilizer and autos and increased investment in energy sector. "Resultantly, we expect market capitalisation of Pakistan to cross $100 billion in 2017 (30 percent of GDP) against current $89 billion now," the report said.
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