KARACHI – According to forecasts based upon earnings growth, the KSE is expected to grow by 15 percent in 2011 with the benchmark index estimated to rise 13,800 by year end, entailing a return of 14.8 percent. Furthermore, Arib Habib research stated that total returns will come out at 21.6 percent, while their top picks for CY11 include POL, PPL, APL, PSO, HUBC, KAPCO, LUCK, NBP and LOTPTA.
It is to be noted that the benchmark KSE100 Index was amongst the top five top-performing indexes in the region in CY10. During the period Sri Lanka’s DJSL20 Index topped the list with exceptional annual return of 107.5 percent followed by the Jakarta Composite, fetching a return of 46.1 percent.
The KSE-100 Index outperformed regional indices including KOSPI Index (South Korea), BSE Sensex (India) and TAI Index (Taiwan). But, with the impact of devastation wrought by the floods during July-September 2010 and the biggest dent to GDP is likely to come from the agricultural sector, with an anticipated contraction of 1.4 percent annually.
It is expected that the real GDP growth in FY11 will be 2.1 percent against the post flood government target of 2.5 percent. While growth prospects are likely to improve in FY12 with expected growth of 3.5 percent in FY12.
CPI based inflation has started to gain momentum after the floods, averaging 14.42 percent annually compared to 10.27 percent in the same period last year.
Escalating government borrowing, higher electricity tariffs combined with higher international commodity prices will fuel inflationary fears. The average CPI inflation for FY11 is estimated to be around 15.8 percent annually.
Prudent fiscal restructuring will be essential in determining the course of economic recovery. It is also anticipated that the benchmark discount rate may inch up by 100bps given high inflation and government borrowing.
It is pertinent to mention that KSE has shown a staggering performance in 2010, with its benchmark KSE100 Index exhibiting a growth of 28.1 percent compared to last year.
The major drivers of the market in CY10 were strong earnings growth of 17 percent, a 54.4 percent price surge in OGDC and a multiplying Foreign Investors Portfolio Investments (FIPI) to $526 million compared to $22 million last year.
