Pakistan equity market outperforms regional markets


Market observers cite the timely polls on May 11 and the resultant election of a single party with a simple majority as a major contributable factor as the Karachi bourse continues to break all the previous records.
The KSE100 Index outperformed the regional markets by posting what the analysts called it an enormous MoM growth of 16.5 percent in dollar terms during the month of May. The equity analysts expect the new government to maintain status quo in terms of taxation in the new federal budget that, they believe, would provide further impetus to the equity market to boom.
A significant escalation was witnessed at the bourse during May-13.
“Such boost can be attributed to the conduction of election on time which seemed dubious at the time,” viewed Abdul Azeem, an analyst at InvestCap Research.
After the ambiguity regarding elections cleared, the market took a U-turn, touching new highs post elections, he added.
The benchmark KSE100 index posted a massive growth of 9.6 percent or 1,908 points since the day of the elections.
However, during May-13 index posted a growth of 15 percent MoM or 2,841 pints to 21,823 points. “This is the highest level since the inception of KSE100 index,” recalled Abdul Azeem.Moreover, he said, the average turnover in May-13 almost doubled, increasing by 85 percent MoM to 202 million shares per day.
The analyst sees two major reasons behind this phenomenal growth in the KSE100 index: Foremost, the formation of the new strong government in the central and the province of Punjab both by a single party, Pakistan Muslim League-Nawaz.
“The government with its strong majority is expected to alleviate poverty in the country and make the tough yet important decision to resolve the energy crises and worst law and order situation in Pakistan,” the analyst observed.
Secondly, he said, the significant surge in foreign investment in the stock market also played a vital role during the month, reaching $271 million, including $114 million payment of Unilever, as against $28 million during Apr-13 as foreign investors showed more trust in the new government.
On international front, the KSE100 Index outperformed the regional markets by posting what the analyst said an enormous growth of 16.5 percent MoM in dollar terms during May-13.
Moreover, the Pakistani equities performed better than the Frontier Market Asia Index which rose by 11.76 percent MoM in May-13. Moreover, the KSE100 index, being listed at the Frontier Market Index (FM Index), outperformed by 12 percent MoM as compared to FM Index growth of 4.47 percent.
As far as regional foreign investment is concerned, India remained the leader on this front as it was able to attract $3.86 billion during May-13. Likewise, Taiwan ranked second as $2.2 billion was invested in Taiwan’s stock markets during the period. Pakistani markets attracted only $271 million during the said period.
“Going forward, we expect the positive rally at the local bourse to continue during Jun-13,” said Abdul Azeem.
Although, he said, the budget for FY14 was to be announced in Jun-13, the newly-elected government was expected to maintain status quo on tax front in the upcoming budget.