Despite the challenging security environment, prevalent energy crisis and structural weakness bearing on the economic condition, Pakistan''s equities have given a sterling performance in the first quarter of 2012, analysts said. During the three-month period, the benchmark KSE-100 index posted a gain of 2,414 points, up 21 percent (in terms of US $20 percent).
The parallel free float based KSE-30 index rallied by 19 percent (US $18 percent) while MSCI Pakistan posted a handsome gain of 17 percent. Total market capitalisation also inched up 19 percent during the quarter to reach $39 billion (Rs 3.5 trillion). "The 21 percent gain in the first quarter of 2012 was the highest return after nine quarters," Muhammad Sohail, leading analyst and CEO of Topline Securities said. Interestingly this was the highest first quarter gains since 2006, he added.
Rejuvenated interested particularly from retail investors has also added much needed depth to the market with average daily trading volume increasing to 196 million shares or Rs 4.7 billion (US $52 million). In terms of shares last quarter volume has occurred after 14 quarters and in terms of value after 3 quarters. "The major impetus to market primarily came from Finance Minister''s acceptance of SECP''s gain tax revamp proposals on January 21, 2012," Sohail said.
This has reignited the investors particularly of individual investors which were side-lined after imposition of CGT and its cumbersome calculation methodology as most of gains generated in last 36 years was not properly declared, he added. Now investors hope that tons of money will come back to the stock market once the Presidential Order is issued. Moreover, dividends payouts by listed companies were also better than expected which helped market to recover. Lastly, foreign fund managers (as of 29 March) turned net buyers after a gap of 3-quarters. They bought shares worth $189 million and sold $164 million resulting in net buying of $25 million.
The performance of Pakistan market in the outgoing quarter was far better then its regional peers. MSCI Pakistan gain of 17 percent (As of March 29) was better than MSCI Asian EM and MSCI FM Asian that posted an improvement of 12 percent and 8 percent, respectively. Similarly, amongst the Asian FM markets as defined by MSCI, Pakistan remained number two after Vietnam.
"As informed to our valued readers in our report titled "Investment Strategy Update 2012" dated March 06 2012, we believe KSE-100 Index will reach 14300 points in 2012," he said. The CGT reforms, better than anticipated foreign flows and improved earnings projections are some key development that would drive the index forward this year, which is currently trading at PE of 6.3x, while offering a dividend yield of 8 percent, he added.
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