A March to Remember Pakistan equities top regional stocks in March

It seems as if there is nothing as exciting as equities these days, since the dramatic change of the investor’s sentiment took place after the finance ministry’s nod to the SECP proposals relating to the Capital Gains Tax reforms.
Pakistani equities, with seemingly no breather, set the volume numbers rolling with rapidly-changing ticker colors on the trading terminal screen providing an eye-catching sight, said a report issued by InvestCap Research Monday.
“Market simmered with high liquidity levels during Mar-12 as all the participants’ heads were apparently sunk into exchanging more and more number of stocks which were on the go,” viewed Khurram Schehzad, the head of research at InvestCap.
In Mar-12 alone, he said, KSE100 yielded 6.8 percent (6.1 percent in USD terms), where equities continued staying supercharged as the average trading volumes of the month stood up 26 percent MoM and a solid 42 percent YoY, to $77.9 million while hitting multi-year highs in terms of share volumes.
He said even the verbal resolve on CGT-concerning issues did the trick, which was yet to be endorsed by the President through the promulgation of the Presidential Ordinance that is to be added as the 8th Schedule to the Income Tax Ordinance 2001).
In this regard, Schehzad said, the delay was already announced (implementation now was pushed to mid Apr-12 instead of Apr 1st’12) buying frenzy in equities continued, may be partly due to the period ending to show better quarter closings by the institutional investors.
“The CGT-related proposals bore fruits in the form of the return of foreign investors to Pak equities and more participation of the retail and/or individual investors (as volumes were more tilted towards second and third-tier stocks who traded with low denominations),” said he.
The Pakistani equities kept headed northwards despite country’s lingering macros chained with the on-going noise on the political canvas and yet-to-recover relations with the U.S. Further, better-than-expected corporate results could not make it at a better time than this, extending investor’s joy further setting aside rising oil and cement prices that in fact benefited index heavyweight companies. Cumulatively, KSE100’s 1QCY12 (Jan-Mar12) return went through the roof with a whopping 21.3 percent (~20 percent in USD terms).
Encouragingly, Schehzad said, with the persistently climbing index, Pakistan equities topped the Asia Pacific slot with eye-widening outperformance during Mar-12.
In global perspective, Pak equities not only stood above Asia Pacific’s average returns but also global averages in Mar-12 with many an emerging market ending the month in the red including the MSCI Emerging Market Index.
Moreover, not only did KSE100 substantially outperform its benchmark MSCI Frontier Market index (1 percent in Mar-12) with a fat margin, but also the Emerging Markets (-3 percent in Mar-12) as well as MSCI Developed (1 percent in Mar-12) and World Market index (-0.1 percent in Mar-12). In addition, Jan-Mar12 quarterly returns also put Pak equities amongst the top-notch equities market slot in the Aisa Pacific region.
In the same vain, foreign flows strengthened further as Pak equities gained further traction in the Asia Pac region with enriching liquidity and persistent capital appreciation. In this regard, net inflows stood at USD17.9mn in Mar-12 alone (excl. off-market outflow of USD9.5mn on the last trading day that resulted in net inflows of USD8.4mn in Mar-12) piling up the net YTD inflows to USD26.3mn (USD16.8mn including the one-off), against a whopping USD5.1bn of inflows into the region during Mar-12, taking total inflows to USD27.9bn YTD (USD14.3bn of outflows in 2011).
The report shows significant returns provided by a mix of cements (DGKC, FCCL, LUCK), 2nd and 3rd-tier banks (FABL, BAFL, AKBL), and gas distribution (SNGP, SSGC), were the most-yielding stocks amongst InvestCap Sample companies that outperformed the index during the review month.
Only a handful of bluechip banks, including MCB, ABL, UBL, and Textiles (NML) with few other sectors like Autos (PSMC) and Insurance (AICL) were having the stocks that outweighed benchmark KSE100’s returns in Mar-12.
Amongst the top-5 scrips, FABL topped the list providing a substantial 37 percent MoM return in a single month. This was followed by AKBL (33 percent MoM), DGKC (30 percent MoM), FCCL (27 percent MoM) and BAFL (18 percent MoM). On a relative basis, except for Cements, no heavyweight bluechip scrips could even catch up to the KSE100’s performance in Mar-12.
On the other hand, while FFBL performed the worse amongst InvestCap Sample companies in Mar-12 as well as in 1QCY12, ENGRO provided best returns at 39 percent on a QoQ basis, followed by FFC (25 percent QoQ) and NBP (22 percent QoQ).
“Once again, continuity of the on-going rally is largely contingent to the materialization of the said Ordinance with respect to the new CGT regime while any stretch from Apr’12 may start cascading negative impacts on both volumes and returns,” the analyst warned.