KARACHI, June 30: The Pakistani stocks yielded return of 34 per cent in rupee terms during the financial year ended June 30, 2006 (FY’06).

Scintillating as they are, the returns worked out short of average annual return of 55pc that the equities have given out in the previous four years, but exceeded the 23pc average yearly return of last 10 years.

A report prepared by analyst Muhammad Imran at stock brokerage firm JSCL stated that it was interesting to observe that in the first half of FY’06 total return of the market was 28pc where later half market posted a return of only 5pc amid volatile trading.

Analyst Jawad Haleem at Atlas Capital Markets Limited pointed out that the year was eventful for the market made an unprecedented intra-year peak of 12,274 on April 17, 2006. And again as was the case last year, it plunged drastically by over 3,000 points. The only difference between the two peaks was that the former took much less time to evolve and erode, whereas the latter took much longer and with many intermittent and prominent reversals, both ways.

Some of the major reasons which could be cited for the climb this year round were extraordinary results announcements across the board; privatisation news/rumours of major entities such as PSO or PPL; the definitive privatisation of PTCL following the payment of $1.4bn by Etisalat; various developments in the oil and gas sector ranging from new discoveries and production activities to the possible GDRs issue by OGDCL together with a secondary public offering; news on MCB’s GDRs issue; Pakistan’s rating up-gradation by Moody’s and reduction in anti-dumping duty by the EU on Pakistan’s bedlinen exports.

According to the analyst, the past five years had been phenomenal for the KSE as it grew every year at a CAGR of 39pc. In view of the oversold situation in the market coupled with outstanding corporate results expectations and positive developments anticipated such as privatisation and public offerings of major entities and a sound macroeconomic situation, the trend was expected to continue in the upcoming year.

Head of Research at Noman Abid & Company, Syed Shahnawaz Nadir Shah, calculated the rise and fall and year-end timings of the stock market in the last 17 fiscal years. He observed that during the last 8 years buying started from that date for which the financial settlement takes place in the next fiscal year (under the T+3 settlement system). For example, purchase made on June 28 would be settled on July 3, 2006.

This buying is generally anticipated on account of two popular reasons: (i) Year end portfolio adjustment (buying or selling to maintain certain quantities of shares). (ii) Showing a higher closing price for some shares in which certain investors may have heavy exposure.

The analyst concluded that ‘Year-end’ effect had nothing to do with fundamental valuations. However, fundamentals apart, the figures all too obviously show that out of the last 17 fiscal year-ends (on half-year basis); 13 times the market had risen and only 4 times it had declined. Also, the rises had been fairly substantial in some cases (generally in the range of 2-3pc in the last few days).