KARACHI: Oil price in 2022 is expected to more than double to $150 per barrel, said Dr Salman Ahmed, head of macro and strategic asset allocation at Fidelity International, a global investment management firm.

Speaking at the KTrade Annual Investor Summit on Thursday, Dr Ahmed said there has been no investment on the supply side in the last seven years while demand for oil is coming down “very gradually”.

“The supply side is coming under pressure rapidly. We think oil needs to go higher for [its] demand to come down... This is a very competitive environment for oil consumers. Prices will remain high to incentivise pressure to move away from oil,” he said.

Expert says last seven years have seen no investment in supply sector

Addressing the participants, KTrade Securities Managing Director Saad Bin Ahmed said valuations on the Pakistan Stock Exchange (PSX) are hovering at the 2001 level.

The KSE-100 index is trading at a multiple of between 4.5 and five, he said while referring to the price-to-earnings ratio that shows the share prices of PSX-listed companies are currently undervalued relative to their profit per share.

The benchmark is trading at a 50 per cent discount to its 10-year historical mean of eight, he said. “We expect the index to rise to 53,000 points in 2022,” he added. It means KTrade Securities — a brokerage that claims to have the most downloaded investment mobile application with over 200,000 registered users — sees an upside of 20pc in 2022 versus the current level of 43,000-44,000 points. “We project earnings growth of 12pc and a dividend yield of 6pc.”

He added that the index has the potential to re-rate once the issues relating to the cash-starved energy chain are resolved. Referring to the recent revisions in energy tariffs, clearance of independent power producers’ receivables and the earmarking of Rs100 billion for the transmission network, he said earnings of the companies belonging to the energy chain have a high potential to grow.

Currency depreciation and interest rate hikes have “significantly increased the cost of owning a car,” which will lead to a fall in the demand for automobiles in 2022.

However, commercial banks will emerge as key winners because of a sharp rise in lending rates.

Published in Dawn, December 17th, 2021

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