KARACHI – Gains, bagged by the KSE-100 index in January, have been overshadowed by the recent slump as the local bourse has now dwindled four percent since the start of 2011. The decline is more pronounced in recent times, as KSE has slid nine percent since January 17.
A closer look on individual stocks suggests that majority of the blue chip stocks have actually declined more than the headline index weakness and stocks like thinly traded Nestle (+28% since Jan 17th) have played a pivotal role in restricting the index’s decline.
While the fall has turned dividend yields attractive i.e. in the range of 15 to 17 percent for the likes of FFC, HUBCO and KAPCO, we believe underperformers or laggards in the recent downturn deserve particular attention, said Aiyaz M Hassan at KASB.
He added that, within our coverage universe, laggards have been led by cements followed by banks and E and Ps. The recent strength in international oil prices (benchmark Arab Light is up 14 percent in the current year and 48 percent since Jun 10) could help unlock value where PPL and POL could be preferred picks, he said.
He added that within banks, both preferred banks UBL and MCB, have receded more than peers.
While PSO too has lagged the market considerably, value could get unlocked if the inter-corporate debt issue is resolved. However, the critical decision of retail petroleum product pricing, at month end, could play a bigger role in shaping near term sentiments on PSO.
Whereas Pakistan has fared relatively better than peers, recent slowdown in foreign portfolio investment (FPI) has fuelled concerns, regarding potential foreign selling, amongst locals.
Similarly, thaw in Pak-US relations over diplomatic immunity of a US national, currently in custody for killing two people in Lahore, has concerned investors over potential impact on foreign flows. Thirdly, local politics has been noisy with PML-N’s 45-day deadline nears its end.
In addition, unrest in the Middle East and its impact on Pakistan, a net oil importer,
