Topline Securities is the best local brokerage, best for overall country research and best for overall sales service in Asiamoney’s Brokers Poll in Pakistan this year. The win comes at a good time for the Pakistani market, which got upgraded to the MSCI Emerging Markets Index in May, an inclusion that will put local stocks and their performance in the line of sight of many global investors.
Saad Hashemy, chief economist and director of research at Topline, tells Asiamoney the firm is well placed to face the heightened interest in the market.
The firm covers 80% of market cap, across 40 companies with a team of seven, including five sector analysts.
Saad Hashemy, Topline
The MSCI inclusion has meant the team is putting even more emphasis on timely research than in the past, keen to capture new clients entering the Karachi Stock Exchange.
The efforts have paid off so far. Hashemy notes the firm already has nearly a fifth of the market of foreign investors in Pakistan's stocks.
Not that the MSCI entry has proven a panacea. The market was on a good streak until the end of May 2017 but then suffered a 30% drop as of the start of November.
But Hashemy thinks there are reasons to be bullish: “There is both political and economic uncertainty that has increased Pakistan market discount to peers. But rising population, GDP growth and investment from China under the China-Pakistan Economic Corridor (CPEC) should gradually decrease this discount. I think the fundamentals remain intact.”
Investment from China amounted to some $5 billion in 2016, and the flow is expected to continue. But the size of the investments remains a double-edged sword.
“That money is pivotal to maintain Pakistan's macro prospects and is expected to be funded mostly through debt,” says Hashemy.
The CPEC's effect goes beyond the landmark infrastructure projects, with some Chinese portfolio investors also showing signs of interest in the market. That process has, however, been slowed by their need for regulatory approval at home.
As for next year, the market should be in for a turnaround, but an upcoming round of general elections could mean more political instability.
“The environment is favourable for sell calls as we recently fixed Karachi Electric as a sell,” says Hashemy. “But on our list, most stocks are buys, due to cheap valuations.”