According to Bloomberg, Pakistani tycoon Arif Habib believes that Pakistan stock market having been termed as Asia’s best market last year has potential for more growth. Habib expects a further 20pc growth led by banks, fertiliser and energy companies. Having said that Habib rejects the popular belief that the market is driven largely by speculation.
Habib affirms that an investor can make huge returns provided he is able to differentiate between people’s perception and reality about investing in Pakistan.
After phenomenal returns of almost 50pc in the stock market during last year, the market seems to have decelerated but the market may expect another boost after the Pakistan Stock Exchange’s (PSX) inclusion to MSCI Inc.’s emerging-market index in May. According to a survey conducted by Bloomberg, there can be 18pc market growth by year end.
Moreover, the incumbent Prime Minister, Nawaz Sharif is focusing on generating economic growth in the country. Acquisition of infrastructural loans from China worth $55b and selling off of 40pc stake in the bourse to the Chinese consortium depict advancing foreign interest in the country.
Despite the optimism generated by the investor markets in Pakistan, one cannot overlook the risks associated with it. Some fear that the growth in the stock market does not fall in line with the real economic growth. It is feared that problems such as debt servicing, government’s effort to privatise state-owned companies, the volatile security situation in the country and a possible slowdown in economic reforms ahead of the general elections 2018 all suggest looming problems.
On the contrary, Habib is of the view that rising stock prices represent investor optimism and point to the fact that the companies are being given their true value. He believes that a sharp rise in the market is a proof of this and the market is now in its ‘consolidation phase’.