Islamabad May 10 2024: Pakistan’s economy will improve and the stock market should perform over the next 12-18 months, with a likely cut in interest rates providing a boost, says Ruchir Desai, fund manager at Asia Frontier Capital.
Borrowing costs can drop to 15% over the next year from record 22% at present, Desai says in webinar organized by brokerage KTrade. Cyclicals such as cement and auto perform well during such times.
Pakistan needs to follow through on the new IMF program, given its debt situation and all sides seem to be on the same page: Desai. AFC Asia Frontier Fund has increased its allocation to Pakistan to 9.6% in April from 5.5% a year ago, and added further in May. It entered Systems after recent correction and Pakistan Stock Exchange’s shares could do well, Desai says.
If Pakistan can go through the current economic recovery cycle without any major crisis, there’s huge scope for multiples to re-rate, he says. The current P/E of 4.4x is well below previous low seen in past economic downturn
