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December 5, 2020

No major political threat seen to country’s economy: AHL report


December 5, 2020

KARACHI: Arif Habib Limited (AHL), a leading business house of the country, on Friday said it foresaw no major threat to the current political setup, terming the exemplary government-establishment relationship a boon for investment climate.

“The success of PDM (Pakistan Democratic Movement) has clouds of uncertainty over it due to the cautious approach of parties such as PPP (Pakistan People Party), which is ruling in Sindh,” noted a report titled “Pakistan Investment Strategy 2021” published by AHL.

“We believe the PTI government would win the senate elections and then there would be no major threat till the end of its tenure,” said Tahir Abbas, Head of Research at AHL.

While Nasim Beg at Arif Habib Corp said, “There is so much noise but there is no imminent threat to the present government”.

Pakistan Investment Strategy 2021 notes the capital market is expected to post a return of 25 percent in 2021 with benchmark KSE-100 Index reaching 52,000 points mark by December 2021.

“We are quite bullish on the capital market given fast economic growth, availability of strong liquidity and attractive valuations,” said Shahid Habib, CEO Arif Habib Limited.

He said due to the construction package announced by government, the local industries particularly cement and steel were seeing higher demand, while the exports were also increasing.

“We anticipate corporate earnings growth of 17.5 percent in 2021. GDP growth is expected at 1.8 percent during FY21”.

Habib informed 2020 saw four initial public offerings (IPO), wherein issuers raised around Rs8.4 billion. “At least eight IPOs are expected in the coming year, which would raise around Rs20 billion in the coming year.”

Talking about foreign investment, he said 2020 saw an outflow of $490 million, adding that a foreign portfolio investment of around $400 million was expected in 2021.

“The US dollar is weakening internationally, and when that happens, funds are diverted to emerging markets. Pakistan is a shining star among the emerging markets primarily because of attractive valuations,” Habib said.

“The jump in corporate profitability is expected to be led by cement, automobile assemblers, textiles, technology and oil marketing while attractive valuations in the banking and oil exploration & production sectors are likely to attract interest.”

He said the recent supportive measures by SECP for digitalisation of account opening were expected to lead towards increase in participation and number of investors in the market. “Additionally, rise in valuations and higher activity in the stock market are likely to attract more companies for listing on the exchange in 2021, the AHL chief added.

The report further said with the rollout of vaccines expected in the near future, AHL expected the opening up of global economies – a major trigger for the exports of Pakistan along with continuance of robust momentum of remittances, which should lend further support to the external account.