KARACHI: For the fourth year in succession, investors in stocks are expecting the market to provide healthy returns in 2015. The investors’ enthusiasm is supported by what many believe to be the economy stirring into life.
“The current year’s ample liquidity and declining interest rates are forecast to propel benchmark KSE-100 Index to 38,000 points , generating return of 18 per cent,” analysts at brokerage Topline Securities stated in their ‘Economic Outlook’ report released on Tuesday.
Analysts stated that being net importer of oil, the country could save $5 billion (2pc of GDP) due to sharp fall in oil prices.
It could reduce energy cost of manufacturing sector and benefit energy intensive sectors, like textiles, cements and chemicals.
Other significant indicators pointed out by the brokerage related to country’s GDP, which was anticipated to grow by 4.5pc in FY15, led by power sector reforms and declining oil prices.
In FY16, the GDP growth is expected to surpass 5pc after a gap of seven years due to better availability of electricity and full year impact of lower oil prices.
“This will take the size of Pakistan’s GDP to $278bn in FY15 and $314bn in FY16 from $247bn in FY14,” the brokerage presumed.
Inflation was likely to remain low with expectation of 5.3pc for FY15 and due to declining inflation and high real interest rates, the SBP was thought to cut policy rate further by 50bps in 2015 to reach 8pc.
The rupee was believed to remain stable against the dollar in FY15 and FY16 due to increasing dollar inflows and decline in import bill.
Foreign exchange reserves were seen to increase further in FY15 to $15.3bn due to expected inflows from HBL’s privatisation, IMF receipts and Coalition Support Fund (CSF). Consumer spending was also anticipated to increase as purchasing power of consumers improves.
Further improvement in fiscal deficit was expected during FY15. Yet, the government could miss its target of 4.8pc due to lower revenues from tax on oil and increased spending on IDPs.
“Sustainability of foreign inflows, resolution of energy crisis, and low export and tax base will remain key challenges for economy,” the brokerage said.
Meanwhile, Morgan Stanley’s chief investment strategist David M Darst said in a recent statement that the Pakistan stocks, with 31pc returns in dollar terms, led the world markets in 2014. However, he was quoted to have said: “I am surprised to see low number of investors in the bourses of Pakistan” and recommended that it should change considering the strong fundamentals of Pakistani stocks.
Darst, who is the author of 11 books and has a PhD in economics from Yale, said that it was wrong to believe that Pakistan was lagging behind due to its proximity with Afghanistan, Iran and India.
“In fact, I believe Pakistan is in the centre of Asian countries, like Iran, Bangladesh, Vietnam and Indonesia, that will significantly contribute to the world economy in coming decades.”