The market performance in Pakistan to remain weak in 2023

Due to Pakistan’s problems paying back its foreign debt and the growing political turmoil in the run-up to the general elections, the market performance in 2023 will mostly stay subpar.

Topline Securities claims that the index may reach a high of 47,000 and produce a payout of just 14%, which is not very appealing when compared to fixed-income securities.

“Huge external financing gap, worsening global financial markets, and political instability are increasing the risk of timely external debt payments,” the Topline securities research report said.

economic crisis in Pakistan

According to the reports, the nation was facing significant and unaware economic difficulties.

Following the report, a larger IMF program required in 2023 and debt relief needed urgently. Along with this, there will be difficult exchange rates and stricter monetary and fiscal policies. The stock market in 2023 probably impact by these factors.

“Inflation is also likely to remain high as we expect average inflation of 26 percent in FY23 and 14 percent in FY24.”

Before the general elections are set for October 2023, political noise is also expected to remain high level in 2023. Even though Imran Khan, the chairman of the opposition Pakistan Tehreek-e-Insaaf (PTI), continues to urge for early elections, some analysts predict a one-year delay owing to the financial downturn. The report also stated that developments over the election and its schedule would continue to influence market attitudes in 2023. “Developments on the elections and its timings will continue to affect market sentiments in 2023, we believe,” The report claimed.

The Pakistani market will keep trading at low values with a PE of close to 4x due to the difficult fiscal environment and increasing political turmoil.

The market is now trading at a PE of 3.2x for 2023. (4.5x ex circular debt and Govt. banks). This value is consistent with what occurred in 1998–1999 when, following nuclear test restrictions and debt forgiveness, the market, on average, traded at or around a PE of 4x. There are just a few nations undertaking debt restructuring trading at PEs of 2-4x, notably Sri Lanka, Zambia, and Ghana.

Following the optimistic outcome, stocks may outperform forecasts if crude oil prices fall significantly and the global credit market recovers. In the worst-case scenario, Pakistan defaults on its debt payments, a decline is anticipated in 2023.

In 2023, it is best to favor non-cyclical, elevated firms with a steady company that will benefit from the low Pakistani Rupee and rising interest rates. The banking, energy & resources, fertilizer, and technology industries specifically addressed in the paper. Meezan Bank (MEBL), United Bank (UBL), Mari Petroleum (MARI), Pakistan Oil Fields (POL), Lucky Cement (LUCK), Engro Fertilizer (EFERT), Systems Limited (SYS), and Interloop Limited are top selections for 2023.

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Rida Shahid
Rida Shahidhttps://hamariweb.com/
Rida Shahid is a content writer with expertise in publishing news articles with strong academic background in Political Science. She is imaginative, diligent, and well-versed in research techniques. Her essay displays her analytical style quite well. She is currently employed as English content writer at hamariweb.com.

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