Key positive developments: analysts revise KSE index target to 14,300

The government's likely acceptance of SECP capital gain tax (CGT) proposal, better than anticipated foreign flows and improved earnings projection are key positive developments that have compelled the analysts to revise their 2012 KSE-100 index target from 13000 to 14300 points.
"Expected implementation of CGT reforms from April 2012 will increase the volume thereby advocating us to reduce the discount at which the market is likely to trade," Muhammad Sohail, leading analyst, who is also CEO of Topline Securities said. With Karachi bourse at 45-month high, it is still 17 percent lower from its peak of 15,676 registered on April 18, 2008, he added. Compared to last 10-year average PE of 8.1x, equity market is now trading at PE of 6.5x which is at 20 percent discount.
He said the acceptance of SECP tax proposals especially about undisclosed income has provided the much-needed impetus to the market with rejuvenated interest from individual investors. Average daily volumes so far in the first quarter of 2012 stood at Rs 4.1 billion ($45 million) as compared to Rs 2.8 billion ($32 million) in the fourth quarter of 2011.
Furthermore, with foreign investors less gloomy about global economy after some signs of recovery in US and Euro-zone, equity markets have rallied across the globe with MSCI world index posting a gain of 10 percent in 2012 year-to-date, while MSCI EM and MSCI FM are up 18 percent and 3 percent, respectively. "On the domestic front, Pakistan market, which was facing risk of foreign selling on the onset of CY2012, has attracted net foreign buying of $12 million in 2012 so far, contrary to our expectation," he said.