KSE posts returns of 17.5 percent in 2015

KARACHI: The bulls outmuscled the bears at the Karachi Stock Exchange (KSE) during the year ended June 30, 2015 as the benchmark KSE-100 index has posted a return of 17.5 percent versus 41.2 percent in FY14.
“The growth momentum cooled off in FY15 despite of monetary easing, stronger external accounts, surging forex reserves, sovereign rating upgrade and potential reclassification of Pakistan to Emerging Markets (EM),” Zeeshan Afzal at Taurus Securities said.
Overall, the KSE-100 shares index surged by 17.5 percent or 5,191.08 points to end the fiscal year at 34,843.61 points. The KSE-30 shares index gained 1,486.21 points or 7.27 percent during the fiscal year to close at 21,902.16 points.
Market capitalisation surged by a significant 6.6 percent during FY15 to Rs7.501 trillion.
Analysts attributed lower and dwindling crude oil prices, falling banking spreads, and tough textile fundamentals as the primary culprits of the weak performance. The foreign investment also was shy of local markets in the fiscal year under review, wherein net foreign portfolio investment clocked in at $38.542 million as compared to inflows of $256.167 million in FY14.
For the month of June 2015 alone, the index surged 4.1 percent. Atif Zafar at JS Global said investors largely ignored federal budget’s negatives like the higher Capital Gains Tax rate and focused more on the positives.
“Interestingly, in spite of shorter trading hours because of Ramazan, trading activity picked up during the month.”
Average trading volumes clocked in 124 percent higher at 377 million shares / day which is 62 percent higher compared to the Jan-May 2015 average.
Net Foreign Portfolio Investment clocked in at $7.5 million in June as against $14.7 million.
Rounding up the market tally for June 2015, the best performing key KSE-100 sectors were Real Estate Investments (+103 percent) and Support Services (+42 percent), while Automobiles (-0.6 percent) and Oil & Gas (-1.5 percent) were laggards.
Drilling down to stock performance, the best performing key stocks within KSE-100 in June 2015 were TRG up 42 percent, Pak Elektron (PAEL) up 21 percent and Lafarge Pakistan Cement (LPCL) up 21 percent.
An analyst at Arif Habib Limited said with June 2015 performance, KSE-100 has not only outperformed all the key MSCI indices but also beaten almost all of its Asia Pacific peers, remaining the top market in terms of returns after Vietnam.
As far as foreign flows go, KSE was the only market standing with insignificant but positive foreign flows of $7.7 million vis-à-vis outflows observed all across the Asia Pacific region.
As corporate result season sets in from mid June onwards, analysts expect market to remain in the rallying mode. Other key triggers include continuity of soft CPI inflation amid weak oil prices keeping interest rates low, possible ratings upgrade by S&P and better payouts.
A key risk, though of low probability amid weak links with frontier markets, could be foreign outflows amidst the Greece default.
Analysts remain sanguine on Pakistan’s equity market on the back of improving economic fundamentals, controlled political climate, improving security situation, and strong corporate profitability.
“After dodging the crisis like situation and clinging to the recovery path, Pakistan would now step into super normal growth phase, we believe. In addition, we expect 10.4 percent profitability growth for FY16, which would further jump to 12 percent in the subsequent year. Furthermore, we assert that the progressive development in the IMF programme, along with necessary economic reforms and aforesaid characteristics, is likely to strengthen the case for re-rating of price multiples at the KSE,” Zeeshan Afzal said.