Pakistan, Asia's best-performing stock market, is just getting started

Key index is up 36% since March after rate cuts

The rebound that’s helped make Pakistan equities Asia’s best performers since the end of March isn’t done yet, according to some money managers.

The nation’s central bank has been among the most aggressive globally in cutting interest rates this year to cushion the economy amid the coronavirus pandemic. That has reduced the double-digit returns from fixed income and bolstered the bullish case for equities.

“Given the abrupt fall in interest rates, locals are still early in their re-allocation from bonds to equities,” said Ayub Khuhro, chief investment officer at Faysal Asset Management Ltd, whose assets have tripled to 35 billion rupees ($210 million) in the past year. “If rates remain at these levels for some time, they will continue to drive the market.”

Pakistan’s KSE-100 Index is up 36 per cent from the end of March, the best rebound among major Asian equity indexes for the period. A slowdown in the rate of new infections coupled with measures to boost an economy that shrank for the first time in seven decades prompted the Dubai-based FIM Partners in July to make Pakistan its biggest exposure after the Philippines. “I see Pakistan becoming our largest exposure in the next six months,” said Moham­med Ali Hussain, research head at FIM Partners, which manages $1.6 billion. “Even after the rebound, there’s room for re-rating assuming the macro picture remains on track,” he said.