LAHROE - Investors at the local bourse opted to book profits during the first week of the new year, amid growing uncertainty on the changing political scenario in the country, experts said.

The KSE-100 index lost 294 points (-1.7 per cent WoW) to close at the 16,649 level. Volumes grew by 7.4 per cent WoW to 148m shares. Foreigners remained net sellers of $2m this week. On the macro front, forex reserves improved to $13.8b post release of $688m under the Coalition Support Fund (CSF) while CPI for December 2012 clocked in at 7.9 per cent YoY. Other key highlights of the week included hike in natural gas tariff by 6.14 per cent, SBP revising refinance rates for various finance schemes and govt plan of Rs15b TFCs to ease circular debt.

Byco and BOP remained amongst the most active scrips during the week while cherry picking was seen in dividend yielding stocks like FFC and IPPs.  Naveed Tehsin, an analyst with JS, observed that FFBL’s board of directors is scheduled to meet on January 11, 2013 to discuss 2012 annual financial result, where it is expected that an EPS of Rs4.29 and a final dividend of Rs2/share.

In 4Q2012, he anticipates that FFBL EPS will stand at Rs2.01, up 30pc QoQ and down 48pc YoY.

FFBL’s 4Q DAP offtake is likely to clock in at 235k tons, down 8 per cent QoQ and 1 per cent YoY while urea offtake in 4Q is expected at 53k tons.

Samar Iqbal, Equity Dealer at Topline Securities, stated that in spite of the fact that global equity markets and commodity prices warmly welcomed the new year, local bourse which has gained 49% last year, lagged behind. Investors got skeptical of increased political noise, sell off at equity markets pushed index 3 per cent lower on week on week basis though it touched historical high of 17,000 at one point in time.

Experts from BMA Capital observed in a report that the period of exceptional performance is not over yet. Influenced by a likely change in political setup, falling attraction of alternate investments, heavy short term liquidity and that too without leverage, expected better performance by regional markets and alluring local valuation will lead the equity market to post another year of attractive gains. Index valuation matrix which comprises of regional as well as local valuation methods suggests that the local bourse will provide a fairly decent return of 17% to reach 19,800 points by 2013 end.

In times of paradoxical economic variables characterized by PKR depreciation amid declining reserves, fiscal imbalances, expected political and economic shifts, low interest rates and strong earnings growth, we recommend investors to focus on high dividend yielding and economically immune stocks. The ‘7’ high conviction ideas for the upcoming year are Pakistan Oilfields Limited, Pakistan Petroleum Limited and Hub Power Company in energy stocks, United Bank Limited from banking sector, Fauji Fertilizer Company from fertilizers, Nishat Mills Limited from textiles and D.G. Khan Cement from cement sector universe. Apart from these stocks they also have strong liking EFOODS.PA, ENGRO.PA, NCL.PA, FCCL.PA, FECTC.PA, NCPL.PA, NPL.PA and PTC.PA.

They said that election year has always been a trigger in itself. Historical trends suggest that our capital market has rallied in double digits in both pre and post elections in anticipation of new faces and policy shifts. Experts believe the next election will yet again bring a hung parliament with no majority lying with any single party. However, the ground realities suggest that Pakistan Muslim League Nawaz (PML?N) with some support from religious, ethnic parties and independents may have an edge.

With no increase in discount rates expected in the first half of CY13, the hunt for better return on reinvestments would lure investors towards equity markets in CY13 also.

Moreover with concerns regarding CGT rules addressed, investors (especially individuals) would continue to participate heavily in equity markets as seen in CY12.

The ultra?loose monetary policy in developed economies expected to be maintained in the near future leaves a lot of room for PE expansion in Asian equities. Though in recent past the quantum of foreign inflows into the local bourse compared to regional peers has declined drastically, the PE expansion in those markets will make Pakistan’s valuation more enticing.