Pakistan Market Strategy
Elections 2013: Game changer:
Pakistan is heading for its most decisive elections in nearly four decades,with election campaigning now in full swing. With less than a week to go to polling, we preview the likely political scenarios that may emerge and their implications.
■ PML-N leading the pack. The PML-N appears to be leading in most opinion polls, and is likely to be form the next coalition government (55% probability). A late swing in favour of the PTI has a 30% probability in our view, while a return of the PPP with a lower mandate due to a split of right votes between PML-N and PTI cannot be completely ruled out.
■ Imran’s emerging as serious challenger. After lagging the PML-N in most polls, there has been a sizeable swing in favour of Imran lately. Interestingly,a strong Imran show could result in a hung Parliament, though it would still be long-term positive, as he would keep the pressure on the PML-N.
■ IMF deal post elections, PKR in for a tough ride. A new US$5-6 bn IMF programme to stabilise reserves is likely to be signed by the new government with an understanding already reached with the coalition government. The PKR, though, remains on course for 7-8% depreciation in
the next 3-6 months.
■ Market re-rating on the cards, hung Parliament is key risk. A clear PML-N or PTI victory could result in a market re-rating with a 15-20% rally over the next 3-6 months. In contrast, a hung Parliament or a return of the PPP remains a key risk. We like Engro, OGDC, Lucky, POL and Fatima, while Mansha group (MCB, DGKC and NML) should be major beneficiaries given their known differences with the PPP.
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