Morning Call about Market Performance Review – Arif Habib Limited

Karachi, July 02, 2012 (PPI-OT): KSE-100 Index posts 10.4% gain in FY12

KSE-100 Index posts a 10.4% gain in FY12

The Karachi Stock Exchange (KSE) ended FY12 on a high note, with the Benchmark KSE-100 Index posting a gain of 10.4% YoY.

According to Arif Habib Limited, the market remained extremely volatile during the year, oscillating between 10,842 and 14,618. 3QFY12 remained the best performing quarter during the year, posting a 21.3% gain, as market stakeholders and regulators finalized the issues of Capital Gains Tax (CGT) and amnesty scheme for the equity investors. The gains achieved during the 3QFY12 were diluted to some extend during the last quarter where index witnessed a modest 0.3% uptick. This was mainly on account of political uncertainty and strained Pak-US relations.

Major Gainers and Losers

Feroze 1888 Mills Limited recorded highest gain in FY12 with its price appreciating by 3.2x on thin volumes. It was followed by EFUG and PICT which appreciated by more than 100%. Intention of International Container Terminal Services to acquire 35% stake in PICT triggered the stock price of the Company as well. During FY12 major laggards were MDTL, DAWH and LOTPTA down by 77%, 48% and 46% respectively. DAWH was severely affected because of gas curtailment to its plant. While LOTPTA suffered from steep decline in PTA margins during FY12 as its demand dropped with slowdown in global economies and high Paraxylene (raw material for PTA) prices.

Volumes rebound on the resolution of CGT issue

Market volumes rebounded in 2HFY12 as the news regarding the resolution of CGT issue hit the market. KSE’s daily turnover in 2HFY12 averaged 196.4mn as compared to 61.9mn in 1HFY12, taking full year average to 125.4mn. The Capital Gains Tax Ordinance 2012 was promulgated in Apr-12 and was subsequently approved by Parliament in the Finance Bill 2012. The ordinance facilitated the investors by appointing the National Clearing Company of Pakistan Limited (NCCPL) as a CGT collecting agent. Furthermore, the Ordinance also froze CGT rates for a period of two years, which is yet another pivotal factor behind the market’s improved liquidity.

Foreign investment exhibited a net disinvestment in FY12

Foreign Investors Portfolio Investment (FIPI) during FY12 remained negative for most of the period, and the cumulative figure stood at USD -174.5mn. 3QFY12 remained the best performing quarter in this respect and witnessed a net inflow of USD 15.3mn. Foreigners meanwhile remained the most pessimistic in 2QFY12 and net FIPI was recorded at USD -102.0mn. During the period under review, individuals invested USD 153.7mn in the capital market. The category was followed by Banks/DFIs who invested USD 34.1mn. Other organizations, NBFC and Companies maintained net inflows of USD 21.4mn, USD 18.6mn and USD 11.4mn respectively.

Net Investments by Category (USD mn)FY11FY12
FIPI

252.9

-174.5

Companies

-22.7

11.4

Banks/DFI

23.2

34.1

Mutual Funds

-68.5

-64.7

NBFC

-52.3

18.6

Individuals

-128.5

153.7

Other Org

-6.1

21.4

Source: NCCPL  

KSE outperforms major regional indices

KSE remained one of the best performing markets in the region with the exception of PSEi (Philippine Index) and Thai Index. All the major regional indices witnessed declines with major losses being witnessed on CSI 300 (China) and TAIEX (Taiwan).