KARACHI, June 29: Friday being the last trading session of the fiscal year 2006-07, the Karachi Stock Exchange was calculated to have posted a growth of 38 per cent for the year ended June 30, with the index closing at its all-time high at 13,772 points.
The year has been termed eventful by analysts since it marked sixth consecutive year of bull run.
The gain of 38 per cent (35 per cent in US$ terms), measured by benchmark KSE Index, in the outgoing fiscal year FY07 was lower than previous five-year (FY02-05) average of 48 per cent, but significantly above the last 10-year (FY97-06) average gain of 25 per cent.
The major thrust came in the fourth quarter whereby the index surged by 22 per cent.
Compared to a gain of only one per cent in 1HFY07, stocks provided a 37 per cent return in 2HFY07.
Exceptionally brilliant year-end reports were released on Friday by Jawad Haleem, senior analyst at the Atlas Capital Markets; Faraz Farooq at the First Capital Securities and Owais Siddiqui, head of research at the JS Global.
Analysts observed that market capitalisation grew at a remarkable CAGR of 51 per cent also reaching its peak at over Rs4tn ($66bn). However, the growth arose amid very thin volumes. Turnover during FY07 averaged 210m shares, which was the lowest since FY02 as a result of which the average daily value traded also shrunk to a three-year low of Rs22bn ($362m).
Like other regional markets, Pakistan equity market attracted a portion of this increased liquidity flow to Asia. That was testified by the fact that foreign funds now hold 7.72 per cent of the market cap, as against 3.28 per cent in June FY06. This also includes the current foreign holding (adjusted for conversion) of MCB, OGDC, and UBL GDRs. Since the current market free float is 24.9 per cent, these funds now effectively hold 31.2 per cent of total free float in the market.
During the year, 13 new companies got listed on the stock exchange, compared to nine in FY06.
In this process, Rs6.5bn was raised in FY07 vis-à-vis Rs3.6bn in FY06.
As opposed to previous rallies which were followed by a major crash, the upsurge in the market this year round has been supported by foreign investors.
One barometer for this is the Special Convertible Rupee Account (SCRA) which close to the end of this year stands at $977m while during the last year, it was $350m.
In addition to this, the three GDRs, namely MCB, OGDCL and UBL, also allowed a significant foreign participation.
Insurance sector topped the charts with a simple average growth of 142 per cent. The banking sector was in second position whose average growth was 72 per cent.
The sector with the second largest market capitalisation, E&P was the second-most worst performer with an overall growth of three per cent while gas distribution sector was the worst depicting a drop of 16 per cent.
Of the listed scrips, Adamjee Insurance was the major gainer which depicted an increase of 202 per cent followed by the Askari Bank and the Bank Alfalah with a gain of 102 per cent.
On the other hand, SNGPL fell the most by 22 per cent whereas OGDCL saw a 12 per cent drop.
But for all that in FY07, Pakistan market underperformed both MSCI EM (43 per cent return) and MSCI EM Asia (41 per cent).
The KSE growth loses some lustre in the light of regional markets, which on average depicted a growth of 48 per cent with the Chinese market (Shanghai Composite) witnessing a 129 per cent upsurge followed by Indonesia's Jakarta Composite with a growth of 63 per cent.
At the other end of the spectrum was Japan whereby the Nikkei rose by only 17 per cent. However, when looking over the past six years, KSE was, in fact, by far the star performer with a CAGR of 47 per cent as against the regional average CAGR of 19 per cent.
When comparing the earnings, multiple and dividend yields, the KSE is currently the most and second most attractive market in the region, respectively. It has a P/E ratio of 13.4x compared to the regional multiple of 16.8x (excluding Nikkei), whereas the dividend yield stands at 3.7 per cent.