LAHORE - The political tension, which has reached the new heights after the MQM decided to quit both the federal as well as the provincial government, has continued to keep the bourses depressed, with few corporate triggers, forcing the KSE 100 index to close flat at 12,464 level with average daily volumes ending lower by 8 percent at 56 million shares. Experts said that the sentiments remained bullish during the outgoing week at the KSE as investors awaited fiscal year-end earning announcements due next week. They said that fertilizer stocks, apart from Fatima (11.4 percent), remained laggards for most part of the week. Initial interest seen on Engros announcement of urea price hike was dispelled by the market following the announcement of governments plan of a 100 percent increase in gas price for fertilizers which led to profit taking in FFC and FFBL particularly on Thursday, while Engro and Fatima gained as they are expected to benefit from subsidized gas prices under Fertilizer Policy 2001. An interesting observation though was a 32 percent decline in the average traded value as heavy weight likes of MCB, Engro and PPL witnessed massive battering. Sana Hanif, a stock market expert, said that Nestle continued to dominate the market, rising 15 percent (up 131 percent in 1 H2011). Further, the FBR reported that tax collection target of Rs1,588 billion for FY11 has been achieved. With this, the outgoing week concluded the year FY11 with a notable gain of 29 percent, outperforming regional markets by 7 percent. Moreover, the government on recommendation of financial advisors decided to defer OGDCs exchangeable bonds issue, keeping in view the weak performance of global capital markets. The market took the news neutrally as OGDC closed almost flat WoW. Textile sector was amongst the major underperformers largely on news of WTO not granting GSP plus status to Pakistan. Based on this, NML and NCL closed down 7.5 percent and 4.3 percent. Monday to Thursday MTS investment was Rs238mn, with average rate standing at 17.60 percent compared to 18.61 percent last week. Syed Atif Zafar, a market analyst, stated that he retains his positive outlook on the market on the back of an impressive earnings growth of 14 percent in FY12 and a deep discount of 48 percent to the regional peers. However, he pointed out challenges on the marco front and political instability as key risks to investment thesis. He is 'Over-Weight on the E&P, Power, Fertilizer and Cement sectors with POL, PSO, HUBCO, LUCK, NBP and ENGRO being our preferred plays. Ahsan Mehanti, another market expert, observed that recovery in global capital and commodity markets on positive economic outlook, strong valuations in oil, banking and fertilizer scrips, hopes for early release of IMF tranch of $3.2b for Pakistan economic support and investor expectations for easing circular debt crises in the country after rise in local power tariff played a catalyst role in positive activity at KSE despite concerns for rising government borrowings and political uncertainty after major coalition partner exit government. As per stock experts, the KSE-100 index recovered by 5.8 percent in 2Q2011, following a loss of 1.8 percent in the preceding quarter taking year to date return to 3.9 percent. Also, the local bourse outperformed its regional peers by an average 5 percent, which largely remained under pressure on concerns over lingering European debt crisis. Resultantly, the offshore investor activity declined at the local bourse too, as foreign investment during 2Q fell to (US$22.0m) compared to $52.5m in the previous qtr. However, the outgoing quarter gains were largely skewed towards Nestle (contributed 380 point out of the 686 points rise in the index) - a thinly traded stock at the bourse. This is also reflective from returns posted by companies under our coverage, as only 7 from a total of 41 companies outperformed the index on an adjusted basis. Fatima Fertilizer outperformed the index by an impressive 19 percent, primarily in anticipation of achievement of its CoD on July 1st. OGDC too outperformed the index by 8 percent as news surrounding the issue of exchangeable bonds worth around $500m remained at the forefront, however which failed to materialize for now at least. On the other hand, NML and NCL were the major underperformers largely on news of WTO not granting GSP plus status to Pakistan.