LAHORE - Sentiments at the local bourse remained positive during the outgoing week, where the second and the third tier stocks remained in the limelight. The KSE 100-i\ndex gained 234 points (+1.4 per cent WoW) to close at 16,808, with volumes declining by 18 per cent WoW to 239 million shares.

On macro front, forex reserves fell to $13.5 billion and CPI for November clocked in at 6.9 per cent YoY. Other key highlights of the week included Pakistan Telecommunication Authority (PTA) issuance of notification to suspend International Clearing House (ICH) agreement, Local Polyester Staple Fibre (PSF) manufacturers increasing their product prices in anticipation of imposition of 10.5 per cent duty on imports and the release of cement dispatch numbers for Nov.

Experts said that it seems as if there is nothing as thrilling as investing in equities these days since the dramatic change of the investor’s sentiments that took place post the implementation of the new CGT-regime and Pakistan’s revitalized relations with the US. Pak equities with seemingly no breather in sight set the volume numbers rolling with rapidly changing ticker colors on the trading terminal screen drawing an eye-catching sight ever. Market has been simmering with high liquidity levels for the last 6-7 months as all the participants’ heads are apparently sunk into exchanging more and more number of stocks that are on the go.  

In Nov alone, KSE100 yielded 4.9 per cent, where equities turned supercharged as the average trading volumes stood up 19 per cent MoM and a solid 95 per cent YoY, to USD 53.2 million (USD 50.8 million YTD, up 19 per cent YoY) while index being busy hitting new records; thanks to monetary easing on the move and apparently unstoppable earnings growth chained with stocky payouts that could not make it at a better time than this, extending investor’s joy further while keeping Pak equities headed northwards. All of these have amply overshadowed the negatives trying to impact equities so far, including marked currency attrition, intensifying power cuts, law & order and the on-going wrangling at country’s political canvas.

Snowballing enough, KSE100’s YTD return (Jan-Nov12) went through the roof with a whopping 46 per cent (35 per cent in USD terms).

Even individual sector-wise buying did the trick as underlying fundamentals turned favorable for previously-crippling sectors; Cements arresting investor attention the most amid sector’s profitability experiencing turnaround for declining costs (slimming leverages, bottomed-out coal prices, better export value through currency value-drop) and dense product prices at home. Then, the Textiles, with thinning debt burden, increased export market access (recently announced ATP from the EU with GSP-1 status soon) and rising export value amid currency fall.

More doable game-plan with respect to gas supplies to industries, especially lingering Fertilizers, also convinced investors to spare some funds for select of fertilizers. Telecom sector was also worth placing funds in on the possible out-of-court settlement of the notorious ICH, while autos were in the limelight as vehicle imports were capped at 3-year ones only. Ulever’s buyback announcement with a price attached also caught investor’s sight resulting in buying frenzy in the scrip.

Positives cited earlier bore fruits and compelled foreign investors to not only keep Pak equities alive in their portfolios but also merit more allocation vis-à-vis other more politically-stable, economically-sound markets. Encouragingly, a tirelessly climbing index put Pak equities amongst the top-notch equity markets’ slot in the Asia Pacific region (2nd in Nov-12) while remaining amongst the top-3 most-yielding equities YTD with eye-widening out-performance. In global perspective, Pak equities not only stood above Asia Pacific’s average returns but also global averages in Nov-12 as well as YTD with many an emerging market ending the month in the red. The entire MSCI slot also lagged Pak equities deep. Not only did KSE100 substantially outperform its benchmark MSCI Frontier Market index (2 per cent in Nov-12 and only 3 per cent YTD) with a fat margin, but also the Emerging Markets (1 per cent in Nov-12, 10 per cent YTD) as well as MSCI Developed (1 per cent in Nov-12, 11 per cent YTD).

In the same vein, foreign flows strengthened further as Pak equities gained traction in the Asia Pac region with enriching liquidity and persistent capital appreciation. In this regard, net inflows hitting the bourse were USD 35 million in Nov-12 alone, piling up the net YTD inflows to USD133 million, however against a mind-boggling USD 40.6bn of inflows YTD (USD 2.7bn in Nov-12) against USD14.3bn of outflows during 2011. Thanks to the two largest emerging markets, India and China, for easing curbs on foreign investments off late.