Showing what the market observers called it “a sterling” performance during the first quarter of FY12, the benchmark index at Karachi Stock Exchange (KSE) is predicted to cross the 14,000 level by the end of current fiscal year. The analysts cite the federal finance minister’s January 21st acceptance of the SECP’s CGT-related reforms proposals as a primary attributive, as the KSE100-share index gained 2,414 points (21 percent) during the review period, July-September FY12, “Despite the challenging security environment, prevalent energy crisis and structural weakness bearing on the economic conditions, the country’s equities have depicted a sterling performance,” said Mohammed Sohail, chief executive of Topline Securities. The float-based KSE-30 also rallied by 19 percent, 18 percent in dollar terms, while MSCI Pakistan posted a handsome gain of 17 percent.
The market capitalization also inched up 19 percent during the said quarter to reach $ 39 billion, or Rs 3.5 trillion.
“The 21 percent gain in 1Q2012 was the highest return after 9-quarters,” said Sohail terming this as highest 1Q gains since 2006. “KSE Index will reach 14,300 points in 2012,” forecasted the analyst.
A rejuvenated interest, particularly from retail investors, has also added the much-needed depth to the market with average trading value increasing to 196 million shares or Rs 4.7 billion, $ 52 million.
“In terms of shares last quarter volume has occurred after 14 quarters and in terms of value after 3 quarters,” he said.
Sohail said the finance minister’s acceptance of SECP’s proposals had reignited the investors, particularly the individual ones who were sidelined after the imposition of CGT and its cumbersome calculation methodology as most of gains generated in last 36 years was not properly declared.
“Now investors hope that tons of money would come back to the stock market once the Presidential Order is issued,” the analyst said.
Moreover, he said, dividends payouts by listed companies were also better than expected which helped market to recover.
Lastly, the analyst said, as of 29 March foreign fund managers turned net buyers after a gap of three quarters. “They bought shares worth $189 million and sold $164 million resulting in net buying of $25 million.”
The performance of Pakistan market in the outgoing quarter was far better then its regional peers. As of March 29, MSCI Pakistan gain of 17 percent was better than MSCI Asian EM and MSCI FM Asian that posted an improvement of 12 percent and 8 percent, respectively.
Similarly, amongst the Asian FM markets as defined by MSCI, Pakistan remained Number 2 after Vietnam.
CGT reforms, better than anticipated foreign flows and improved earnings projections, he underlined, as some key developments that would drive the index forward this year. The index is currently trading at PE of 6.3x, while offering a dividend yield of 8 percent.
