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KSE 100 INDEX PERFORMANCE FROM FEBRUARY 2011 TO MAY 2011

During February the stock market played under pressure and continued its downward spiral owing to

continuous panic selling, in line with regional markets, following domestic and international political

uncertainty.Panic selling did not only come from local investors but also from foreigners who sold $5.4

million worth of shares during the week ended on February 25.The stock markets benchmark 100-share

index closed down seven per cent to 11,224 points. The intensity of the pressure was so high that the

KSE-100 index fell by 300 points in intraday trade on more than one occasion.The bourse continued to

tumble on foreign selling as stock markets around the world remained under pressure from the Middle

East crisis. Ongoing tensions in the Middle East triggered a rally in international commodity prices,

raising concerns of its impact on the countrys macros economic factors.

In March, the KSE 100 index increased to 11,809.54. Average returns for pure equity fundsoutperformed

the KSE 100 index and stood at 7.38%. At month end 12mo returns for pure equityfunds averaged

15.77% while the KSE 100 returns at 16.03%.During Mar11 average returns for Islamic equity funds

increased to 5.69% with 12mo averagereturns increased to 20.79%. Balanced and asset allocation fund

returns showed an increase inaverage return 5.17% while for 12mo it showed 3.05% decrease with returnaveraging 11.16%.The decrease in returns was due to the decline in the KSE100 index. However, since

AssetAllocation Funds contain TFCs/Sukuks in their portfolios, their NAVs fluctuate unexpectedly

andimpact returns

During April 2011, Karachi Stock Exchange witnessed a U-shapedperformance closing +2.1% MoM. The

performance can be termed averagein the regional context. The volatility in the market led to a

secondsuccessive negative monthly reading for FIPI.KSE-100 index rose by 248 points or 2.1% closing at

12,057.54 pointsduring the month of April 2011. At start of April, KSE 100 witnessed adownward trend

with lower average daily volumes. While on the macrofront, ADB in its policy preview anticipated

Pakistans GDP growth to be2.5% for FY11 as opposed to 4.1% in FY10. The CPI for March soared

to14.2% in comparison to 12.9% in February. Moreover, ADBs previewforesees dismal outlook forPakistan on back of lower growth, higherinflation and vulnerable security conditions. In second half of

the month,expectations of good corporate results for the quarter ending March 312011 pushed the market

upwards.

In the month of May the Karachi Stock Exchange (KSE) market has closed on positive note. KSE market100 index has also crossed the threshold of 12,000 points this week. The Karachi Stock Exchange(KSE) 100-share index has reached 11,967.35 points increasing 87.39 points or 0.73 percent.

Following news have played vital role in Karachi Stock Market index movement:

According to analysts the Karachi Stock Exchange (KSE) will continue to disturb investors in upcomingweeks, because investors have some serious concerns over new taxes in upcoming budgetIn last week investors have showed interest in Lotte Pakistan PTA, JSCL, ANL and OGDCLThere is uncertainty about the future of Pakistan and US relationshipsOil prices have fallen, which made oil and gas sector to under performThere are news of positive increase in fertilizers in the light of gas curtailment issue, which showedpositive momentum on fertilizer and chemical sector


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Strong corporate profitability has reignites interestThe total exports of Pakistan has reached up to $20 billion, while remittances stood at record high $9.05billion, as per data collected at the end of AprilChina has announced some critical investment decisions ($15 billion), in the form of investment in TharCoal as well as increasing overall tradeENGRO has purchased the US firms food business, Al- Safa Halal

Jahangir Siddiqui & Co, Gharibwal Cement, Pakistan Reinsurance, E.F.U. Life Assurance and NIB Bank

were the major gainers while Grays Of Cambridge, New Jubilee Insurance, Habib Metro Bank, Kohinoor

Energy and Pak Cables were major losers at KSE last week.

We continue to eye three key driving themes for near-term performance of KSE-100, namely:(1) Movement in international commodity prices, as Pakistan is heavily dependant on crude imports;(2) Clarity on the fate of Pak US relations after Bin Laden escapade and(3) News flow on FY12 Budget given Pakistan has started its discussion with IMF.

The talks with the IMF will carry most importance and be a key determinant of the market direction nextweek, in our view, with focus primarily on budget related reforms such as imposition of Gross Asset Tax(GAT) and the RGST. Implementation of these reforms would remain the decisive factor in order forPakistan to secure extension of the IMF program. Drilling down to stocks, we have this week downgradederstwhile favorite LOTPTA from Buy to Underperform, on soft margin and volume outlook.

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