SARWAT FATIMA has
recently joined Elixir Securities Pakistan, a corporate member of
Karachi Stock Exchange. Prior to joining Elixir she was working for KASB
Securities as an Investment Analyst, responsible for preparing in-depth
company/industry analysis for oil and gas, and textile, cement and FMCG
sectors. Earlier she worked for Aqueel Karim Dhedhi Securities (AKD)
where she was responsible for providing research coverage for Pakistan
to Merrill Lynch besides preparing in-depth coverage of textile, PSF,
cement and fertilizer sectors. Prior to joining AKD she worked for KASB,
where she started her career as Intern in August 1999. Sarwat has done
her B.Sc. (Hons) and M.Sc. Mathematics from University of Karachi. At
present she is also busy in study for Chartered Financial Analyst (CFA).
How do you compare Pakistan's equities market with other regional
Pakistan has lost its top performing market status to other emerging
markets. The main reason was the recent correction that took place
during the months of September and October when the index nearly lost
25% after registering over 100% gains in little over 6 months. The
interesting factor to note here is that Pakistani market has become more
attractive in terms of valuations after this correction. This factor has
also addressed most of the investors concerns where they were pushing
downgrades on Pakistani market after a consistent bull run of over last
Will the KSE-100 index cross 5000 level?
I think so, but this can only be achieved in the long run. Given the
fact that our market is momentum driven and generally it draws its
momentum from the news flow, the recent slowdown in the positive news
flow is likely to affect the market direction in the short term. The
recent developments regarding privatization of PSO and the
newly-activated privatization of PTCL can further push the market.
However, the market also needs some international inflows as well to
move ahead in terms of numbers. I'm bullish in the long run but I
foresee a consolidation phase in the short to medium-term. The 5000
level of the KSE-100 index is achievable but we should target this in
What were the factors contributing towards the bull run in the recent
Ds were instrumental in bringing a bull run in the market. De-dollarization
is the first factor where the country has seen unprecedented dollar
inflows through increased workers remittances and reverse capital flight
from Pakistanis. This factor pushed the market to "less stocks-more
money". De-regulation is the second factor that has made
significant contributions towards this bull run. This phenomenon has
acted both ways. On one hand, it has made the sectors more lucrative
thus attracting investment flows into stocks belonging to some of the
sectors and, on the other hand, the growing demand has pushed the
companies to enhance their capacities to improve their profitability.
The GoP's efforts for strengthening the institutions and subsequently a
very pro-active role of the regulators, Securities and Exchange
Commission of Pakistan (SECP), has helped in sustaining the bull run.
How do the corporate earnings affect market performance?
corporate sector has performed very well in the recent past. The
efficiency drive among most of the local companies is another reason
that actually made the old corporate stories decent enough to attract
investors' attention to the local companies. Moreover, the growth in
economy has enlarged the over-all pie size that led to higher sales
volume for most of the companies. In addition to this, de-dollarization
of the economy has led to lower interest rates. The reduction in
interest rates has resulted in strong recovery of those
sectors/companies that were at the brink of default owing to higher
financial charges. The reprofiling of debts of these institutions and
enhanced consumer financing are contributing to increased aggregate
demand. On the operating cost side, a stable currency has also played an
important role in improving operating margins for the companies.
What are the possible reasons for lack of interest of foreign investors
in the local equities market?
are some very obvious reasons behind their absence. Initially, the
foreign investors were not very comfortable with the market recovery
owing to larger political risk. Later on their nervousness about the
market increased on account of too much recovery in too little time.
Since the market has been driven by attractive dividend yield. While the
yield attracted the local retail as well as institutional investors, an
around 12% dividend yield in rupee terms was not attractive for foreign
investors due to their perceived risk of investing in Pakistan.
Moreover, lack of marketing efforts from the Pakistani brokerage
community can also be termed as another reason responsible for poor
response from the foreign investors. In my view, the foreign investors
may enter the local market in the medium to long-term. The tremendous
response to public offer of 2.5% shares of Oil and Gas Development
Company (OGDC) has made Pakistan market very visible within small cap
emerging markets. The issuance of Eurobond by three international houses
will improve Pakistani market profile and will attract the investors. On
top of every thing the further improvement of Pakistan's credit rating
will further boost the investors' confidence.