Karachi Stock Exchange (KSE) made another history, as the KSE 100 index registered fasted ever recovery of 54 per cent in a short span of 10 weeks. After touching a low of 4815 points on January 26, 2009, the index closed at 7433 points last week, posting an increase of 2618 points.
"This is the fastest recovery ever seen at the local exchange" Mohammed Sohail, a leading stock market analyst said. According to his analysis the gain of 54 per cent in a brief span of 10-weeks has never seen ever since the composition of KSE 100 Index in 1991. Similarly, the market capitalisation has also jumped to $28 billion from $19.5 billion in last 10 weeks, an increase of $8.5 billion.
According to Sohail, this euphoria in the stocks market is due to continuous flow of positive news on the political, economic and corporate fronts. The restoration of judges and the Punjab government triggered the rally. Moreover, rising foreign exchange reserves after disbursement from World Bank and IMF also positively impacted investors sentiments.
"The increase in deemed duty, the likely resolution of Qadirpur pricing issue and rising crude oil prices bodes well for the listed oil stocks" observes Sohail. And that is why the heavy weight oil stocks are leading the rally at the local bourses along with Cement and Fertiliser.
The drastic slow down in foreign selling coupled with government decision to reduce the profit rates on National Saving Schemes also provided support to equities that rose by more than 9 per cent last week, Sohail added.
National Saving products were attracting Rs10-20 billion a month. Sohail said "with the recent cut of 70-140 basis points in their returns some funds may flow back into the banking system, and may be to the mutual funds and stock market".
The recent bull-run has increased Pakistan market forward looking price earning multiple to 7 times as compared to 5 times a few weeks back. Though regional markets are also witnessing a decent recovery, Pakistan discount to regional markets has reduced. Sohail says, "with foreign investors share in total volume shrinking, it is the local investors that will set the direction of the market in the near future".
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