Strategy: Cautious optimism over pace of reforms In our recent meetings with EM and FM focused funds, concerns on growing possibility of weaker momentum in the economic reforms progress and threat to potential slow- down in investment cycle were frequently discussed. Investors are questioning the government’s ability to push through politically challenging reforms including energy sector reforms, privatization, broadening of revenue base and cooperation of opposition parties in passing through IMF-mandated bills. A secular bull rally warrants rebuilding of investors’ confidence on economic reforms process and political stability. Restart of talks with the IMF for the fourth/fifth reviews may prove to be crucial. Performance of Pakistan equity market would now be more dependent on earnings growth and yields. We reiterate our liking for cements, banks, E&Ps, power and select names in fertilizer. We believe a recent broad-based drop in commodity prices and the likely relief to Pakistan’s import dependent economy is not fully appreciated. A 20% FYTD drop in oil prices has obviated the need to raise power tariff at least in near term.
Posted on: Mon, 13 Oct 2014 08:20:52 +0000
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