In spite of local political tensions, Karachi Stock Exchange (KSE) remained one of the best performing markets in the world for the third consecutive year led by foreign interest, local equity market, gained with better volumes. Analysts said the government's secondary market offerings, energy sector reforms and the declining yield on government papers helped the bull-run in 2014.
According to Topline Securities, the benchmark KSE-100 index gained 6,870 points in 2014 thereby generating a handsome return of 27 percent. Thanks to 4 percent appreciation of the Pak rupee (PKR) against the US dollar, gain in $ terms remained 31 percent. Price-only (without dividend) KSE-100 Index moved up 18 percent ($22 percent) in 2014. Gains from equities in 2014 were in line with last 10-year average yearly gain of 26 percent and 20-year 21 percent from Pakistan market.
Quoting, Bloomberg, the report revealed that Pakistan ranked third in 2014. And for the third consecutive year was amongst top 10 markets in the world. Moreover, in Asian frontier markets (as categorised by MSCI), Pakistan ranked No 1 outpacing Sri Lanka, Vietnam and Bangladesh by a big margin.
"Average daily volumes declined slightly to 209 million shares during 2014 as compared to 222 million shares in 2013. However, in value terms, they stood at Rs 9.4 billion ($93 million) as against Rs 7.6 billion ($75 million) in 2013 thanks to improving prices and big share offerings in 2014," said Muhammad Tahir Saeed, Topline Securities. This is in-line with last 10-year average daily volume of 212 million shares; however, much lower in value of Rs 15 billion or $198 million. In single stock futures, average volume rose by 6 percent to 24 million shares a day while the value increased by 18 percent to Rs 2.2 billion better than 2013 average of 22 million or Rs 1.9 billion, he added.
Besides improving macros, major impetus to the market in 2014 came from higher foreign inflows. Foreign investors, that hold $6.1 billion worth of Pakistan shares which is 33 percent of free-float (9 percent of market cap), remained net buyers in 2014. During the outgoing 2014, foreigners bought $2.4 billion and sold $2.0 billion, resulting in the net inflow of $386 million ($697 million including UBL secondary offering) compared to net buying of $398 million in 2013. This was in spite of $46 million net selling in December 2014 (Dec1-30, 2014).
According to Tahir, CY14 will be remembered in the Pakistan capital market history for mega public offerings led by sale of shares by government of Pakistan. Total offerings for 2014 reached 9 compared to 3 in 2013. This number is good compared to last 5-year average annual offerings of around 3 per year but is still less than 30 offerings a year in 1990s.
The outgoing year will be historic in terms of money raised through these offerings. After a gap of 7 years, Rs 73 billion was raised through offerings in 2014, thanks to booming market, ample liquidity in the hands of investors and risk-taking appetite. This compares favourably with meagre Rs 4bn raised in 2013. He termed the outlook for 2015 positive: "In 2015, we believe, improving macros and better visibility of Pakistan amongst foreign investors is likely to result in market re-rating," he added.
Economic recovery, falling oil prices and rising foreign portfolio investment can re-rate Pakistan market PE to 9.0-9.5x in 2015. This coupled with ample cash liquidity and declining interest rates can take benchmark KSE-100 Index to 36,000-38,000 points, up 12-18 percent from current levels, he predicted. However the biggest risk to our positive outlook is global economic situation in the light of falling oil prices. Any major crisis in global markets may force foreigners to offload their positions in all stock markets including Pakistan, Tahir pointed out.
Comments
Comments are closed.