Some of the world’s top money managers are once again warming up towards Pakistan’s $50 billion market after the returns last year were among the best globally, Bloomberg reported on Wednesday.

According to the report, asset managers from companies such as BlackRock Inc. to Eaton Vance Corp, are “warming up” to the country’s stock exchange, which handed investors 84 per cent returns in 2024.

“Attractive valuations and a stabilising economy have improved the outlook for local shares, with Intermarket Securities Ltd predicting a gain of about 40pc for the main KSE-100 Index this year,” it stated.

“You don’t have to stretch your imagination to make an investment case for Pakistan,” said Steven Quattry, New York-based portfolio manager at Morgan Stanley Investment Management Inc, told Bloomberg.

The rally has been supported by strong earnings growth, he said.

The Pakistan Stock Exchange (PSX) surged last year, propelled by the International Monetary Fund (IMF)’s $7 billion bailout deal.

Last week, the Global credit rating agency Fitch had acknowledged Pakistan’s progress when it came to making headway regarding economic stability.

In a note, the agency had said, “Pakistan has continued to make headway restoring economic stability and rebuilding external buffers.”

Last year, the agency had upgraded Pakistan’s long-term foreign-currency issuer default rating (IDR) to CCC+ from CCC on the back of the country’s deal with the IMF.

However, it had warned that deteriorating external liquidity, for example linked to delays in IMF reviews, could lead to negative action.

According to Bloomberg, the optimism in the stock exchange was “reflected in foreign fund allocations”, stating that Pakistani stocks had a 5pc weight in BlackRock Frontiers Investment Trust as of December 2024 — which marked a return for it for the first time since March 2022.

“Eaton Vance also reentered the market in the June quarter following a brief exit,” the report said.

Legal & General Investment Management Limited and Evli Fund Management Company have also raised holdings, according to data compiled by Bloomberg.

The level of foreign investor interest at present is comparable to the peak years of 2014-2018, according to Mohammed Sohail, chief executive officer of Topline Securities, a brokerage firm in Karachi.

However, the report warned that the political landscape still remained “fragile”, citing the incarcerated PTI founder’s ability to mobilise crowds for protests “from behind bars”, which poses a threat to the economy.

“A downgrade in the nation’s status to frontier market status by FTSE Russell that took effect in September hurt sentiment, prompting foreigners to turn net sellers in the last three months of 2024,” the report said.

However, it added that despite challenges, investors remained optimistic given the improving external finances and foreign exchange reserves.

“If Pakistan can manage its current account deficit, which they should be able to, we can see a multi-year rally in the market,” said Ruchir Desai, a fund manager at Asia Frontier Capital Ltd. in Hong Kong told Bloomberg.