KSE Analysis

As per expected KSE index have crossed the 8,000 points psychological level, last week. This is the highest level achieved during this year (2009). The index have increased by 1.77 percent and closed at 8,011.31 after increment of 139.08 points. There were expectations about SBP intention to cut its lending rate (discount rate) in monetary policy. And according to experts the release of the third tranche of IMF standby loan of $840 million and approval of an additional $3.1 billion loan have helped the market to cross the 8,000 points level smoothly in short term.

Market participants were cautious because of spiritless results of some blue chip companies, and no positive earnings surprise witnessed. In last week three blue chip companies (OGDC, PSO, HUBCO) have announced their full year FY09 results. The earnings of PSO and HUBCO were close to the expectations of their shareholders, but OGDC have completely disappointed investors because of its below then expected EPS.
And investors were also worried of any significant reduction in discount rates of monetary policy announced by SBP. Moreover, cement sector’s market capitalization was down five percent on weekly basis amid decline in cement prices in the country.

But there was a huge investment from offshore investors and they seemed to be highly optimistic. According to the latest numbers foreign portfolio investors have invested $18.4 million more in the last week. They have bought shares of worth $30.9 million and sold shares of $12.7 million.
Now as you may know that Governor SBP (Salim Raza) has announced monetary policy on 15th August, 2009. They have announced 100bps (in rate of 13 percent) in its discount rate.
Actually analysts, market experts, and investors were expecting at least 150bps in discount rates. LCCI (Lahore Chamber of Commerce and Industry) has also said that this 1pc cut in rate is not enough. LCCI president said that there is need to further cut in interest rate. And it is expected that market will go under technical corrections, initial reaction of market would be negative with index declining by 50 - 100 points, and investors might opt for profit selling in next week. Moreover, activity in the equity market will become dull ahead of Ramazan.

Written by: Rana Khurram

NOTE: The information posted in this blog (forum) is based on current afairs & invstors point of view. There may be discrepency in the ground realities

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