Muddassar Malik, chief executive officer of BMA Funds, who oversees the equivalent of $120 million in stocks and bonds, comments on his outlook for Pakistan’s stock market after the benchmark Karachi Stock Exchange 100 index sank 3.2 percent to 16,107.89 yesterday, its steepest drop since Aug. 9, 2011.
Stocks fell after the country’s Supreme Court ordered the arrest of Prime Minister Raja Pervez Ashraf in a corruption case involving rental power projects. Prior to that announcement, Tahir-ul-Qadri, a popular cleric, rallied thousands of protesters in the capital Islamabad, calling for the government to be dismissed. Malik spoke in a phone interview from London late yesterday.
On the impact of the court order:
“The events are very significant, disruptive events for Pakistan’s political landscape. But I feel this is not the end, perhaps it’s the beginning. I believe the likelihood is that these events will be driving the position into positive territory.
“The structural and the fundamental story in Pakistan remains unimpaired; high population, a country with significant demand driven by domestic consumers and located in one of the fastest growing regions in the world. What is missing is a set of economic and political policies which create the right environment for investment and I think the disruption can bring about that change in confidence. There is a certain degree of optimism that we have to look forward to.”
On investors’ fears:
“There are concerns about the future direction post-elections. Investors are looking for clarity. In the last four or five years, Pakistan has been through a very difficult and challenging period in terms of politics and economics as well as the war on terror. So investors see a landscape that is starving of investment, and I think people are hungry to get back into the game.”
On market sentiment:
“The unexpected announcement was obviously a jolt for the market and it caught the market unaware and wrong-footed in the context of the political demonstrations taking place in Islamabad. Market sentiment is 100 percent driven by politics at the moment and I think it’s unrealistic to assume that sentiment will change very quickly for the next week to fortnight.”
On BMA Fund’s index target for 2013:
“Our index target for the calendar year 2013 is 20,000, and we don’t feel that the current set of events will derail that target for the time being. With the market showing the declines it has done and also the declines it could do in the coming days, it will certainly set up some of the good high-quality stocks to give healthy returns in excess to 20 percent to 30 percent.”