KARACHI - Double digit earnings growth and continuous foreign inflows can take Pakistans benchmark KSE 100-index to 14,000 points mark in 2011, stated Topeline Securities in its report, which was released on Tuesday. According to the report titled Pakistan Investment Strategy 2011, energy, consumer and banking sectors will lead the rally in 2011. Energy sector will continue to post decent return amid power shortages in the country, elimination of power subsidy and governments focus on developing this sector that has strong political implications also. The report commented: While consumer demand in Pakistan is gradually improving due to rising middle class and urbanisation. Banks mainly due to stable net interest margins (NIMs) and lower provisioning will post better earnings during 2011. The report included NBP, POL, Engro, Hubco, NML and DGKC as top six picks for the upcoming year, recommending investors to focus on mid cap stocks that are trading at steep discount and have good management with consumer linked businesses. The report projected: Just like last year the rise in share price will be gradual and not abrupt amid liquidity crunch with local investors and lower GDP growth coupled with high interest rates. The likely 20 per cent gain in 2011 is based on 10 per cent discount to last 10-year average PE of 8.0x (ex- OGDC) as this discount justifies economic slowdown, higher inflation, bad governance, fiscal indiscipline and unending inter corporate debt. As per the report projections, increasing foreign investors participation and double digit corporate earnings will remain the main catalysts for the market in the next year. After 4 years (2007-2010) of flat earnings, listed companies profits are likely to post an average annual improvement of 13 per cent in next 3 years (FY11-13). The growth will be led by energy and banks followed by cement and consumer sector. Foreigners with record net buying of over $500 million in 2010 will continue in the upcoming year due to availability of ample liquidity in the global markets. Moreover, improving volumes at Pakistan market coupled with the fact that it has lagged behind other markets will also attract offshore investors, it said. It also revealed that Pakistan with no threat of any tax on dollar inflows, as expected in few other countries remain attractive on PE multiple as it is trading at deeper discount of 50 per cent to the Asian markets, more than average historical discount of 30 per cent. And with interest rates rising in most of the Asian economies, offshore investors focus in Pakistan will increase. Pakistan with double digit profit growth looks attractive at PE of 7.0x (ex-OGDC) at a time when other frontier markets in Asia trade between PE of 11-33x and the lowest after Pakistan being Vietnam that trades at PE of 10.6x. Moody and S&P has also reaffirmed Pakistan sovereign rating of B3 and B-with stable outlook, 5 notches below their investment grades, despite the fact that the country faced significant loss of macroeconomic stability, it mentioned. The report sees security situation in the country, smooth sailing of present political setup, effective implementation of Marginal Trading System (MTS) and last but not the least the direction of local interest rates will also influence the share prices in 2011.