CY2012 sees Pakistan equities gain 48%


In spite of economic issues, power shortages and security related concerns, the country’s equity market remained one of the best performing in Asia during the calendar year 2012.

The benchmark KSE-100 Index gained 48% in local currency and 37% in US$ terms in the outgoing 2012 with only 9 trading sessions remaining, observed analysts at Topline Research in a report issued Monday.

“Major boost to Pakistan equities was provided by declining interest rates that sharply came down by 450bps in last 18 months (250bps in 2012). Resolution of Capital Gain Tax related issues, improved foreign flows in equities, rising consumerism, better corporate earnings and relative calmness on political scenario also supported the share prices,” they said.

The market worth of Karachi bourse is now Rs4.2tn, up 43% in calendar year 2012. However in US dollar terms the market cap is still down 42% from its peak of US$75bn seen in April 18, 2012. Sharp decline in Pak Rupee since 2008, absence of large listings and decent dividend payouts have restricted the growth in the overall market valuation. As a result, Pakistan’s market cap to GDP ratio of 20% of Pakistan is one of the lowest in the region.

Average daily traded value remained Rs4.7bn in 2012 compared to Rs3.5bn in 2011, an improvement of 35%. In terms of shares, volumes have jumped substantially by 121% in 2012 to 175mn shares a day mainly due to investors’ interest in low price shares. In the absence of vibrant derivatives market and lack of new listings, in spite of bull run the volumes are still lower than average daily of Rs30bn witnessed in the period 2005-07

Though Pakistan stock market has posted a handsome gain in 2012, the trend of equity public offerings at Karachi bourse remained depressed. Pakistan equity market saw only 3 IPO’s in the outgoing calendar year 2012 compared to 4 in 2011.

This low level of listing is seen after a gap of 6 years while it also compares unfavorably with last 10-years average of 11 offerings a year. During outgoing 2012, a total of Rs500mn (US$5mn) was offered to general public, HNWI (High-Net-worth Individual) and local & foreign institutions, which is substantially lower than Rs4.8bn (U$$56mn) offered in 2011.

The rally in 2012 was led by mid caps as traditional sectors like Exploration and Banks did not outperformed. Cement stocks were among the top performers as investor re-rated the sector by 152% in 2012, on account of improved earnings. Growing demand and firm prices, kept cement makers’ margin improving. Further, reducing cost pressures due to decline in coal prices and interest rates also helped.

Similarly, improving earnings of listed textile firms on account of stable cotton prices, increased regional demand and declining interest rates helped this sector to perform despite lower share in the overall market capitalization.

Further, recently approved EU trade package and strong textile export numbers provided further triggers to the performance. Resultantly, textile sector gained 99% in 2012.