lahore -

After punching in a solid 49 per cent return in 2012, Pakistan equities sailed through high tides while sustaining new peaks till April 2013, experts said.

According to AHL analysts, in April 2013 alone, KSE100 yielded a cracking 5.2 per cent return while mustering up a massive 12.3 per cent return YTD since Jan 2013, outdoing even the world’s most developed markets DJIA (12.2 per cent YTD) and S&P (11.0 per cent YTD). Average volumes, on the other hand, were down 14 per cent YoY, and 8 per cent MoM, in April with average traded value standing at $77m during the month. Though strong corporate profitability growth, as well as payouts, played its due role in unlocking market valuations to a certain extent so far, heated up political campaigns alongside worsening violence in Karachi kept investors conscious about any possible derailment in the election process.

Experts said that while the on-going rally can largely be attributed to the sustainable earnings growth of Pakistan’s (listed) corporate so far and the gradually rising clarity on country’s political canvas, corporate profitability of the KSE100 took a slight dip in Jan-March quarter. KSE100’s profits were down 7.3 per cent QoQ in 1QCY13 while the same were up 4 per cent vis-à-vis Jan-March. Where most of the sectors recorded growth in profits on a YoY basis, few heavyweights marked declines on QoQ basis pulling down index’s profitability growth in 1QCY13.

Commercial banks, having 24 per cent weight in the KSE100 profitability, recorded a 4 per cent decline in profits  while few other bluechip sectors joined the row i.e. Chemicals (profit decline driven mainly by fertilizers), Construction & Material (decline mainly driven by DGKC and ACPL’s profits amid plant shutdowns), Food Producers (caused by decline in Efoods and Ulever’s profits), Fixed Line Telecom and General Industries, with their cumulative weight of 45.5 per cent. Profits growth in Oil & Gas (including E&Ps, Refineries and OMCs) partially supported corporate profits with a massive 40.1 per cent weight in corporate profits, recording 7 per cent QoQ growth in 1QCY13 along with few others in the row such as Non-life Insurance and Automobiles with all three having cumulative weight of 42.6 per cent in corporate profits.

After lackluster performance only in March, once again, Pakistan equities not only outshined the Asia Pacific region in terms of price gains but also the key MSCI world benchmarks, despite the exception of political transition at home. More encouragingly, foreign flows were as solid as anything at $28m in April 2013, settling Jan net inflows at $98 million, realizing as much as 80 per cent of last full-year inflows.

Experts at AHL see month of May to be a more eventful one since the new government will be formed and, if so, they see market going further northwards as an initial reflection of the on-time political transition from one complete-tenure democratic-government to another. Followed by the new government setup, next big development will be budget-making for FY14 and the much-awaited progress on the new IMF loan that should boost overall confidence once the new political setup takes place and the pitch for an economic revival is laid through the new IMF reforms.