LAHORE - The week concluded with market shedding 219 points (1%), the week started off with market seeing 332 point correction, and in the following couple of days index consolidated at 26,600 levels. In the build up to Fed’s meeting in which it (Fed) decided to slash down its bond purchase by $10 billion, regional and global markets remained under pressure. This pressure pushed participation on the lower side as investors remained cautious. Average daily volumes fell 23% to Rs8.8bn as against Rs11.5bn in the previous week. The passing week saw Impressive results from FFBL and FFC, however, the scrips saw profit taking as some investors were expecting higher dividend from FFBL and bonus from FFC. During majority of the week pressure was seen in PSO and ENGRO due to high roll over position. Main interest throughout the week was seen in BOPR1, BOP, ANL and FCCL.

Experts said that despite a relatively lower correlation to international markets than peers, the Karachi Stock Exchange was unable to avoid the tumult in regional markets this week. Pressure on emerging market equity and currency values was led by the US Fed’s plans to taper off its stimulus more sharply in the months ahead. Only the last trading day of the week saw some positivity on the back of low expected January 2014 inflation numbers. Other news on domestic shores was underwhelming where (1) the law & order situation across the country has continued to worsen with the government at a crossroads on whether to push for talks or take a hard-line approach towards terrorists; (2) results announced for the December 2013 ending quarter thus far have carried limited positive surprises (largely in-line with or below expected) and (3) the country’s foreign exchange reserves continue to head down (dropped below US$8.0bn this week) amidst a seemingly infirm plan of action (option of public vs. sole offering of government stake in OGDC, ABL, HBL and UBL debated in the media) on the privatization of State Owned Enterprises (SOEs). A glimmer of good news meanwhile was that the US is all set to disburse US$352mn to Islamabad under the Coalition Support Fund (CSF) in the coming week.

Experts said that for the second consecutive year, Pakistan has been one of the best performing markets in the world as it posted a gain of 49% (US$-based 37%) in 2013. Pakistan ranked amongst top 10 markets in the world as shown in the accompanied table. First democratic regime change in Pakistan’s history, coupled with foreign inflows, created positive sentiments in the market. Pakistan 2013 return of 49% compares favorably with last 10-years and 20-years average annual return of 28% and 22%, respectively.

MSCI Pakistan gained 38% in 2013, much higher than 21% gain of MSCI Frontier Markets (MSCI-FM). Moreover, in Asian frontier markets (as categorized by MSCI), Pakistan ranked first outpacing Sri Lanka, Vietnam and Bangladesh by a big margin.

Average daily volumes improved to 6-year high of 222mn shares during 2013 as compared to 173mn shares in 2012. In value terms they stood at Rs7.6bn or US$75mn as against Rs4.7bn or US$50mn in 2012. This is in-line with last 10-year average daily volume of 220mn shares; however, much lower in value of Rs16bn or US$251mn. In single stock futures, volume was 22mn shares a day or Rs1.9bn (US$18mn) better than 2012 average of 13mn or Rs0.9bn (US$9mn).

Besides the new investor-friendly PML-N government, major impetus to the market in 2013 has come from higher foreign inflows.

Foreign investors, that hold US$4.4bn worth of Pakistan shares which is 36% of free-float (8% of market cap), remained net buyers in 2013 as Pakistan equities attracted almost 11% of total net inflow (US$3.7bn) seen in frontier markets.

 During the period, foreigners bought US$2.0bn and sold US$1.6bn, resulting in net inflow of US$403mn. It is a significant growth from last year’s net buying of US$125mn.

Apart from few technical listings, Pakistan equity market saw only 3 IPOs (Initial Public Offerings) in the outgoing calendar year 2013. Shares worth Rs4.2bn (US$41.1mn) were offered to general public, HNWI (High Net Worth Individuals) and local/foreign institutions through IPO and book building, which is substantially higher than Rs500mn (U$$5mn) offered in 2012.