Pakistan's stocks, the cheapest in Asia, may advance by 23 percent in the next eight months, buoyed by overseas funds and improved company earnings, according to National Investment Trust Ltd. "All the fundamentals indicate that the market will pare most of its losses of the past two years" and reach 13,000 by end-December, Manzoor Ahmed, who manages the equivalent of $857 million as head of asset management at state-owned National Investment, Pakistan's largest equity fund, said in an interview yesterday. "The economy is in a good recovery phase."
Pakistan's benchmark Karachi Stock Exchange 100 Index trades at 8.75 times future earnings, the lowest in Asia, according to Bloomberg data. A Taliban guerilla offensive has killed hundreds in a nation that's been ruled by the army for half of its existence since 1947, when it gained independence.
The KSE100 rose 0.5 percent to 10,589.26 as of 12:13 p.m. in Karachi, from yesterday's close of 10,533.57. Still, its 41 percent lower than its record in April 2008.
Oil companies, power generators and lenders may lead gains in Pakistan's stocks this year, said Ahmed, without naming any.
The KSE100 index sank as much as 69 percent from its peak after the Karachi Stock Exchange restricted trading for four months from August 2008 to prop share prices up.
The gauge has climbed 13 percent this year, extending last year's 60 percent advance as overseas investors bought more equities in South Asia's second-largest economy. Gross domestic product may grow 3.4 percent in the financial year ending June 30, after a 2 percent gain in the previous year, according to the Finance Ministry.
Stock gains may be limited if accelerating inflation prompts the central bank to raise borrowing costs, while a struggle between the nation's top politicians, President Asif Ali Zardari and opposition leader Nawaz Sharif, a former prime minister, may limit the government's ability to implement policies aimed at buoying the economy, Ahmed said.
Foreign investors bought net $176.6 million of Pakistan stocks between Jan. 1 and April 8, after selling a net $237.4 million in the same period last year, according to stock exchange's National Clearing Company of Pakistan Ltd.
The KSE100 Index plunged 58 percent in 2008, its first annual decline since 2001. Pakistan needs to expand at an average 6 percent pace over the next five years to cut poverty, according to the government.