KSE all set to mark new records with bullish rule
March 09, 2012
Karachi Stock Exchange (KSE) is witnessing inflows of foreign and local investments with brisk trading sessions pushing its indices unabated at new peaks thanks to the government which surprisingly accepted all proposals without any condition and check for equity traders who are all set to avail emerging opportunities in the market.
The KSE 100-share index recently breached through the psychological barrier of 13,000 points to reach the four year high at 13,088.97 pointes, which earlier touched the same level in June 2,008.
The upward rally is likely to attain new benchmark in future once the government verbally accepted proposals are implemented for the pledged period and traders will believe the market a safe-haven for their investment.
On 21st January 2012, Finance Minister Dr Abdul Hafeez Shaikh paid a visit of Karachi Stock Exchange and agreed all demands of traders including removal of withholding tax (WHT) on brokers’ commission and freezing current rate of Capital Gain Tax (CGT) till June 2014.
There were opened the doors for reluctant investors and new investors as well because no question will be asked to anyone at all regarding the source of income and everyone can make turn their black money into white.
The verbal 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 individual investors.
KSE responded handsomely as in the closing week it recorded high trades and KSE – 100 index reached 11,774.68 points by gaining of 760.22 points or 6.9 per cent. The KSE 30-share index rose by 731.21 points, or 7.18 percent, to 10,907.45.
In one of the week, it was observed that foreign investment of worth $1.6 million landed at Karachi Stock Exchange (KSE) in the closing week and the volumes grew at the bourse to hit 22-month high at 322 million shares.
The bourses continued to sustained high levels in the past weeks with sustained run-up pushed the benchmark about six percent during the last couple of weeks.
At the moment the KSE-100 index has crossed 13,000 mark, the analysts forecast that the market will touch again its pre-reaction level of 15,172.00 points hit a decade earlier.
Not only equity traders are aggressive but the government is also flexing its muscles to avail benefits to generate money from the equity market through privatization of public sector.
The government shaped up its plan to initiate a total of eight (8) IPOs (Initial Public Offering) and SPOs (Secondary Public Offering), after the Privatization Commission’s proposal of Capital Market Transaction Road-Map has been reportedly approved by the Cabinet Committee on Privatization (CCOP).
The privatisation process apparently has been planed to contain fiscal deficit of financial year 2011-12 as the government got the opportunity to give shape to generate money from the improving capital markets.
The government’s privatisation plan is estimated to fetch $330-390 million through floating of Initial Public Offerings (IPOs) and Secondary Public Offerings (SPOs) of eight public sector companies likely in the next month, analysts said.
Because Fiscal deficit-funding is being carried out through domestic sources primarily through banking channels that has surged to an alarming level, which is up to 60 percent of the domestic financing in first half of current financial year 2011-12 while external sources including foreign direct investment (FDI) and exports earnings are largely seen drying up.
There is expected to be a mix of listed and non-listed companies to be privatised through both local and global capital markets like IPOs, SPOs and Global Depositary Receipts (GDRs), analysts further added.
The listed companies on cards for IPOs, SPOs and GDRs include Pakistan Petroleum Limited, Habib Bank Limited, National Bank of Pakistan and KAPCO while non-listed public sector holdings (stake being offered by the government) include State Life Insurance, Pak Arab Refinery, National Insurance Company, Government Holding Pvt Ltd, Islamabad Electric Supply Company and Faisalabad Electric Supply Company. staff report
The traders and the government are no doubt well be ultimate beneficiaries from the change of policies but the equity market performed outstanding in its global field.
KSE outshined global average and back in the top-5 equity-market slot with persistently climbing index. Pakistan equities regained their lost identity amongst the regional outperforming equities in February 2012. In global perspective, after lagging for the last few months, Pakistan equities stood above global average returns in February 2011 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 up 2% in February 2012 with a fat margin, but also the Emerging Markets leapt 6 percent in February 12 as well as MSCI World index up by 5 percent in the month.
As far as foreign equity flows go, Pakistan equities have now been gaining traction in the Asia Pac region after marked improvement in liquidity and volumes as the net inflows $8.2 million received during February 2012, $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 April 01 may cascade negative impacts on both volumes and returns.