December 15, 2006	Friday	Ziqa'ad 23, 1427

KARACHI, Dec 14: Equity markets have provided an average annual return of 11 per cent during the month of December in each of the years between 2002 and 2006. Analysts mention that winter has never been able to cool off the stock markets in any of the five years since the bullish run began in 2002.

From the start of the bull run that year, average annual return of the KSE has worked out at 57pc from 2002-06 to date, said Muzzamil Mussani, analyst at JS Capital Markets. “Except for last year when the KSE-100 index rose by six per cent in December, rest of the years have evidenced double digits growth,” says the analyst. The highest return in terms of percentage stood at 18pc, which was in December 2002, while the chilly month of 2003 showed an index rise by 10pc.

Half way through the current month this year, the market is still moving sideways, which raises the question if this will be any different from rest of the winters?

Muzammil stated that there was no common factor that could have set the bullish trend in each of the past years in December.

“However, every year one or other favourable news resulted in positive momentum of index. Last year, higher oil prices, news regarding privatisation of NIT and finalisation of PTCL deal with Etisalat triggered the market to move up by six per cent in that month,” notes the analyst.

Moreover in December 2005, CFS was introduced in real time basis. Cement sector performed well on the back of meeting between President Musharaf and ministers of four provinces to discuss controversial issue of dams. In December 2004 once oil price played a role. Mega expansion plans were unveiled by cement players owing to higher demand in the country, which attracted huge interest of investors in the sector.

During December 2003, the positive rally was mainly on the back of positive news on political front. Expected agreement between the opposition and the government on a Constitutional package in regard to the LFO and its passage in the parliament and positive developments in relationships on the Pakistan-India front, were noted to be triggering factors.

Analyst Salman Rasheed at Taurus Securities concurred with the pattern of gains in the month of December. He calculated about the same returns in the last four years as the other analyst during the last month of the year. He mentioned several reasons for the lucky December for stock investors.

Those included: Year-end factor for financial institutions. Early expectations of half-yearly/annual financial results that are announced in late January or early February; anticipation of New Year buying from both local and foreign institutions; and the high crude oil price environment of the last three years that led to increased interest in oil stocks such as OGDC, PPL and POL that accounted for 30pc of the total KSE-100 index market capitalisation.

Salman reported that in the last three years, the rallies that begun in December acted as a launching pad for further upside heading into the New Year. December rallies were sustained into January, except for 2003 when there was a correction of around six per cent.

“The average January return from 2003 to 2006 has been 427 points or about five per cent, however, the last three years (2003-2006), the average has been higher at 621 points or around nine per cent,” says the analyst.