We’ve been hearing time and again that Pakistan’s stock market is undervalued and is not performing based on fundamentals, primarily because of political uncertainty feeding into a poor economic policy.

Now with some certainty returning, particularly on the economic front, many are wondering what the true level of the market is. We asked some of the country’s top stock analysts this question.

Here’s what they had to say.

Arif Habib Commodities CEO Ahsan Mehanti

The market is expected to surpass the previous high of 53,127 points in the near future. This expectation is based on the economic support receipts from various sources, including the IMF, friendly countries, and multilateral and bilateral agencies.

The significant decrease in the 5-year Credit Default Swap (CDS) and the increase in Eurobonds following the IMF staff level agreement for a $3 billion bailout financing indicate that the market is moving towards its appropriate weight.

Frontier markets typically trade at price-to-earnings (PE) multiples of 10, while Pakistan’s market is currently valued at a multiple of 4. This valuation discrepancy presents an upside potential of 150 per cent over the next five years. In the near term, pressure remains due to a high interest rate because of the prevailing inflationary trend.

Near-term level: 53,127 points

JS Global Capital Head of Equity Sales Syed Faran Rizvi

If market multiples are to recover to a level of four times, the index target would be 62,000. This value would still represent a discount of approximately 33 per cent compared to the market’s average PE ratio of six times.

Near-term level: Not given

Topline Securities CEO Mohammed Sohail

We have been saying that Pakistan stocks are trading at an unbelievably low PE ratio; the valuation was even lower than countries that have defaulted on their loans.

Now with a better-than-expected IMF deal, we believe the PSX could see the 48,000 level in the short term assuming no major hiccups on the political and economic front.

In addition to this, there is a strong likelihood of re-rating of PSX as its PE increases, which is currently hovering near 3x.

Recent improvement on the macro front after the IMF deal where country has already started receiving bilateral funding, rating upgrades (a notch upgrade by Fitch to CCC), rejuvenated foreign investors’ interest and cooling-off effect on the inflation front may likely re-rate the aforesaid historic low multiple towards 4.5-5x band, which indicates the index should witness all-time new highs of 55,000 in the medium term.

Near-term level: 48,000 points

Intermarket Securities CEO Azneem Bilwani

The market in Pakistan is currently trading at a PE ratio of 3.9, while the Sri Lanka market trades at a higher PE ratio of 5.5-5.6 despite having experienced a default.

Even with a high interest rate, once the IMF deposit is made, inflation is expected to decrease.

The stock market in Pakistan could trade at around 48,000-49,000 points in the short term. By December, the market has the potential to reach 50,000 points.

Near-term level: 48,500 points