Pakistan emerges as Asia's top performing stock market, rises 36% since April

With a slew of aggressive rate cuts to support the ailing economy, Pakistan has emerged as the top-performing Asian stock market since the beginning of FY21.

The country's headline index KSE 100 has surged 36 percent since the beginning of April. In comparison, Nifty has gained 33 percent while other prominent Asian markets, such as Hong Kong's Hang Seng, China's Shanghai Composite and Japan's Nikkei 225, have risen 8-23 percent.

The outperformance relative to its Asian peers can be attributed to a slowdown in the rate of new infections coupled with the measures taken to boost the economy that shrank for the first time in seven decades.

Experts believe that if rate cuts are maintained, the market may continue to rise higher.

Another factor at play, Pakistan equities have so far been driven largely by domestic players. Foreign investors have remained net sellers to the tune of $346 million this year, in line with the general trend witnessed in other key Asian markets, barring China Once the foreign money starts to flow into Pakistan's equities, the market can rally further.

The smart rebound from the flash crash of March, policy rate cuts along with liquidity injection from the International Monetary Fund has prompted 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," Mohammed Ali Hussain, research head at FIM Partners, which manages $1.6 billion told Bloomberg.

"Even after the rebound, there’s room for re-rating assuming the macro picture remains on track,” he said adding that the KSE 100 is still down more than 50 percent from its life-time high reached in May 2017 in dollar terms.