Karachi: The Karachi Stock Exchange 100 Index back in the top-5 slot in Asia Pacific region, registering healthy improvement in average trading volumes of 40.7 percent MoM and 36.9 percent YoY, to $61.9 million in the month after Ministry of Finance (MoF) accepted proposal of equity traders.
With persistently climbing index, Pakistan equities regained their lost identity amongst the regional outperforming equities in Feb-12. In global perspective, after lagging for the last few months, Pakistan equities stood above global average returns (see table alongside) in Feb-11 where regional as well as world equities also rallied on subsiding debt-default fears previously furthered in the US and Eurozone economies and fresh liquidity was injected with their policy rate being on freeze).
Not only did KSE100 outperform its benchmark MSCI Frontier Market index (2% in Feb-12) with a fat margin, but also the Emerging Markets (6% in Feb-12) as well as MSCI World index (5% in Feb-12).
As far as foreign equity flows go, Pakistan equities have now been gaining traction in the Asia Pacific region after marked improvement in liquidity and volumes (net inflows $8.2 million received during Feb-12, $7.7 million YTD, against a whopping $12.5 billion of inflows into the region during the month, $22.6 billion YTD).
The continuity of the market rally is now largely contingent upon the materialization of the verbal acceptances with respect to the changed CGT regime while any stretch from Apr’01 (implementation deadline) may cascade negative impacts on both volumes and returns.
Even the verbal resolve alongside continuous reassurances on the promised change in the existing CGT regime by the SECP yielded instant results in the shape of return of the foreign investors and more participation of the retail and/or individual investors (as volumes were more tilted towards second and third-tier stocks with low denomination i.e. below Rs50/sh).
Pakistan equities headed northwards despite concerns raised by Moody’s and the IMF on country’s macros chained with the on-going noise on the political canvas. It seemed as if the investor never had time to put ear to any such happenings other than the CGT-related concerns and the resolve thereof. Further, better-than-expected corporate results could not come at a better time than this, stretching investor joy to manifold set aside rising oil and fertilizer prices benefitting index heavyweight companies. Cumulatively, KSE100’s YTD return (Jan to date) went up to double-digit at 13.5% in Feb-12 (12.3% in Dollars terms).
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