KARACHI, Jan 5: Judging by the performance of the past 10 years, Pakistani equities were expected to herald the New Year with a warm welcome. Although the first week of January has been cool as winter for the stock market, analysts point out that things might improve as temperatures fall on the political front.

In the first week of trading at the Karachi Stock Exchange (from Dec 31, 2012 to Jan 3, 2013), the KSE-100 index saw a pull back by 294 points from 16,940 points to close at 16,649 points on the last trading session on Friday.

In contrast, global equity and commodity markets began on a positive note. The KSE which had gained 49 per cent in 2012, lagged behind. An equity brokerage house which compiled figures of performance by regional markets, showed that except the Pakistan bourse which showed dismal performance, almost all regional markets moved higher in the range of 0.21 per cent for Malaysia to 3.65 per cent for Dubai.

The month of December 2012 had seen a slow down in the KSE’s climb to the cliff to reach 17,000 points. That level was scaled for a brief moment on the last trading day on Monday the Dec 31, 2012. Yet a mid week fall left investors peering ahead as the dust on political front made immediate outlook hazy.

Analysts at brokerage firm Topline Securities wrote in a report: “Analysing previous years, we have observed that equity prices along with volumes increase as fund managers allocate fresh money for stocks.”

The December-end financial results season is around the corner with some mid-tier companies expected to announce financial figures in the second week, starting Monday.

In the last 10-years (2002-12), the benchmark KSE-100 index has yielded an average return of 3 per cent in January. Excluding the great crash following the imposition and lifting of the infamous ‘price floor’ in 2008-09, the average recovery has stood out at 5 per cent in the first month of calendar year.

Interestingly, in 8 out of 10 previous years, market has gained values in January. Furthermore, average traded volumes also jumped by 57 per cent in January as compared to December.

In rupee terms, traded values of stock have soared 40 per cent in January over December in the 10-year period. A chart tracking stock performance in January of 2003 to 2012 shows that going by returns, 2007 proved to be the best with a return of 12 per cent, while 2009 was the worst, yielding negative return of 8 per cent.

In terms of shares traded, 2009 saw the panic selling with volume soaring over December by 274 per cent.

Most market participants marked the triggers for stock price run up in January as the receipt of the Coalition Support Fund and the pattern of corporate results.

While the CSF at $688 million have already arrived to provide the much needed support to the rupee which witnessed decline of 7.6 per cent against the dollar in 2012, key company results mainly those of Fauji Fertiliser; Fauji Bin Qasim and E-Foods, expected to be announced in the last week of January, could be the harbinger of good or bad times ahead.

In spite of 49 per cent gain in 2012, Pakistani stocks still trade at an attractive price-to-earnings (p/e) multiple of 6.8 times with dividend yield at 7 per cent.

Among the few 'outlook strategies for 2013' that are handy, BMA Capital says the market is set to provide a fairly decent return of 17pc to reach 19,800 points by 2013. Taurus Securities sees 2013 as a year of volatility.

Topline Index target is 19,500 for 2013 and Arif Habib Limited states: "Pakistan equities are yet to re-rate given their grossly undemanding valuations. If we adjust prevailing regional discounts to historical levels (average discounts being 5pc-48pc), laced with justified p/e, earnings growth and the target price models, a weighted average index target of 19,991 appears, with a big leap of 3,089 points by 2013-end”. The brokerage expects Pakistani equities to produce total return of 18 per cent in 2013.