KSE bulls rule over Asia

Despite negatives like the ongoing political turmoil and ratings downgrade by Moody’s Pakistan remained the best performing market of Asia during the month of July, shows the MSCI Indices.
During the month in review, the benchmark KSE 100-share index marked an appreciation of 5.6 percent month-on-month (MoM) after resuming its rally that was suspended since March this year. This was unlike the historical pattern depicted in the past 10 years’ July monthly returns that averaged at 2.2 percent. The market average value, however, have been lower in the last decade with only $ 43 million, down 80 percent from decade’s average at $ 119 million.
“If we segregate the monthly return in two halves, we find that during the first half of the month, the market remained in upward trajectory and touched the highest level of 14,568 on closing basis,” viewed Mazhar A. Sabir, an analyst at InvestCap Research.
Sabir cited improvement in the Pak-US strained ties after the resumption of Nato supplies as a major attributable factor for the stocks market’ rally saying, however, in the later part of the month the market remained stagnant and the index showed range bound behavior with low activities highlighting the investors’ mood during this holy month of Ramadan.
The analysts at Topline Research, however, opine that better foreign inflows and easing inflation, along with improving Pak-US relations, helped Pakistani equities to outperform Asian emerging and frontier markets.
According to Farhan Mahmood, a Topline analyst, with continued headwinds in the Euro zone and uncertain global economic growth, all leading MSCI Indices remained almost flat during the month. The MSCI World posted 1.2 percent return while MSCI emerging and MSCI frontier markets posted a return of 1.6 percent and 0.9 percent, respectively.
On the other hand, Pakistan market outperformed all regional markets. Amongst 12 Asian countries tracked by the MSCI, Pakistan posted highest US dollar return of 5.6 percent beating all other regional markets that posted a return ranging from negative nine percent to four percent.
Compared to KSE 100-share index’s 5.6 percent growth, India and China, the two leading markets, posted negative returns of 1.1 percent and 4.4 percent, respectively. Moreover, Pakistan’s performance relative to other Asian frontier market, like Sri Lanka, Vietnam and Bangladesh, was far better with all posting negative return of 0.4 percent, 2.0 percent and 8.9 percent, respectively.
“So far in 2012 Pakistan is second best performing market in Asia while it is top performing in Asian Frontier Markets,” Mahmood said.
During the year, he said, the benchmark index posted a gain of 22 percent in dollar terms only to be beaten by Philippines that posted a return of 27 percent.
Compared to foreign net selling of $ 109 million ($40 million excluding Hubco deal) in June, the foreigners in Pakistan turned net buyers of $30 million (gross buying $64 million, gross selling $33 million) during July.
So far in 2012, foreigners have bought $540 million worth of shares while sold $541 million value of shares, thus resulting in net selling of $1 million. However, if we exclude Hubco deal, then foreigners are net buyers of $68 million in 2012YTD. The future outlook of the local equities, the analysts believe, is positive. A sector-wise performance shows that July saw the cement sector outperforming the KSE 100 index returns and posting a return of 16 percent based on market capital followed by financial services and software and computer service sectors, which posted returns of 13 percent and 12 percent MoM, respectively, compared to 6 percent return of the index during the month.
“The corporate result season is getting in its full swing, this holy month of Ramadan may see slightly better returns compared to last a couple of years,” said Sabir. In addition, the analyst said, the central bank’s monetary policy decision for the next two months, due in August, had also turned favorable for the stocks investors as no change in (12 percent discount rate, which may continue provided the State Bank borrowing of the government together with inflation stays within targeted limits for FY13.