KSE’s highly impressive performance praised

RECORDER REPORT

KARACHI: After a gap of four and a half years, Pakistan’s benchmark KSE 100 Index closed near its all time peak of 15,676 seen on April 18, 2008, analysts said.

Market capitalization of Karachi bourse has reached a record level of Rs 3.95 trillion. However in US dollar terms current market cap of $41.6 billion is still below its all time peak of $75 billion witness on April 18, 2012.

“Though the Index has reached close to its peak, market volumes are still unimpressive as compared to 2008 average daily volume of 195 million shares (Rs 21.6 billion/$328 million), volumes in 2012 so far is 175 million a day (Rs 4.7 billion/$51 million)”, Muhammad Sohail, leading analyst said.

“This huge decline in value traded is due to absence of investor friendly leveraged products coupled with huge losses suffered by investors in 2008 that has badly affected market depth”, he added. Interestingly the forward PE of Pakistan market is now at 6.2x compared to 10.6x in April 2008, he said, adding the reason why PE is lower than what it was in 2008 is due to earnings growth in last five years coupled with the fact that KSE Index is a total return index that reinvest dividends.

Thus on different valuation techniques the market still looks attractive as it traded at PE of 6.2x compared to last 10 year average PE of 8.2x. PBV is 1.5x compared to last 10-year average of 2.2x, he said.

He pointed out that in 2012 to date Pakistan market is best performing market in Asia so far with KSE Index gaining by 38 percent in local currency terms and 31 percent in USD terms. The rally is mainly led by declining interest rate, euphoria on upcoming election and resolution of gain tax related issues.

“In our pre-budget report dated May 17, 2012 we forecasted that Index will cross all time peak by December”, he said. The market has already achieved this level in October. “However we still remain positive as we think that market will further rejuvenate on the upcoming election”, he said.