Stocks mark 20 percent record gains during March

[LahoreEstate]

RECORDER REPORT
KARACHI (April 01 2009): Pakistans stocks marched towards a record gain during March 2009 with the KSE-100 index posting a rise of 20 percent. "These huge gains in a month were seen after a gap of 49 months" observed Mohammed Sohail, a leading stock analyst. He said that Pakistan outperformed the emerging markets by 800 basis points in March 2009.

He recalled that the last time when the Karachi stock market went up by 22 percent was in February 2005, before the infamous March crash that caused regulators to conduct many enquiries--without any fruitful result.

According to him, the month of February 2005 was not comparable with March 2009. He believes that the 2005 rally was based mainly on high cost leverage financing, where ready future spread rose to more than 50 percent on annualised basis. But, this time, there was no leverage product available, except for in-house badla, which is prohibited yet very common.

The March rally of Pakistans stocks coincided with decent recovery in world markets, he said. The world stocks achieved their best monthly performance, in more than six years, in March. The MSCI World gained significantly during the month but the index was still down 12 percent in the first quarter of 2009. The gains in Pakistan equities were mainly due to the flow of positive news on political and economic fronts.

Sohail said he believes that reduction in political uncertainty was the major contributor that restored investors lost confidence, though there was no major change in the outlook of corporate earnings. The improving balance of payments situation of the country, coupled with release of payment by World Bank and IMF, helped boost investors sentiment.

But, in spite of booming share prices, offshore investors sold stocks worth $53 million on net basis during March 2009. During the first quarter of 2009, net foreign selling of $239 million was seen at Karachi Stock Exchange.

"The buying euphoria during the month was mainly led by local investors and especially few high net worth investors", Sohail said, and added that the deteriorating law and order situation and attractive valuation elsewhere would force foreign investors to further trim their holdings in Pakistan.

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