Pakistani stocks make strides in 1Q2012

KARACHI: According to a market report local stocks showed a sterling performance in 1Q2012 in the face of challenging security environment, prevalent energy crisis, and structural weakness bearing on the economic condition.

The report said that during the three-month period, the benchmark KSE100 index posted a gain of 2,414pts or 21% (US$20%).

Moreover, the float based KSE-30 rallied by 19% (US$18%) while MSCI Pakistan posted a handsome gain of 17%. Market capitalization also inched up 19% during the quarter to reach US$39bn (Rs3.5tn).

The 21% gain in 1Q2012 was the highest return after 9-quarters. Interestingly this was the highest 1Q gain since 2006.

Rejuvenated interested particularly from retail investors has also added much needed depth to the market with average trading value increasing to 196mn shares or Rs4.7bn (US$52mn). In terms of shares last quarter volume has come to pass 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 Jan 21, 2012. This has reignited the investors particularly of individual investors, which were sidelined after imposition of CGT & its cumbersome calculation methodology as most of gains generated in last 36 years were not properly declared.

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 firms were also better than expected which helped market to recover.

Lastly, foreign fund managers (as of March 29) turned net buyers after a gap of 3-quarters. They bought shares worth US$189mn & sold US$164mn resulting in net buying of US$25mn.

The performance of Pakistan market in the outgoing quarter was far better than its regional peers. MSCI Pakistan gain of 17% (As of March 29) was better than MSCI Asian EM and MSCI FM Asian that posted an improvement of 12% and 8%, respectively. Similarly, amongst the Asian FM markets as defined by MSCI, Pakistan remained second to only Vietnam.