Karachi Stock Exchange Weekly Analysis 13 May, 2012

The Karachi Stock Exchange (KSE) market has witnessed a bearish trend during the week. KSE – 100 index has reached 14,230 points by losing 387 points or 2.66 percent. According to experts, Correction on the go, yet traded value goes through roof. The turnover dropped 29.30 percent to 236.94 million shares as compared to previous week’s close of 335.16 million shares.

Interestingly, while average share volume growth on WoW basis remained flat at around 261mn shares, average traded value went through the roof to USD120mn, up 35.5% WoW, as average intraday volumes remained concentrated towards heavyweights.

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

  • Domestic political uncertainty and the deteriorating US-Pak ties amid the US Congress seeking new restrictions on aid to Pakistan kept investor activity under check
  • Signing of Demutualization Bill by the President
  • Proposed bill in the US Congress committee linking Pakistan’s military & economic support to NATO supplies depressed market sentiment further
  • Foreign buying was limited to US$ 3.3 million
  • Investors are cautious seriously concerned about the developments on upcoming budget
  • Budgetary proposals related to 15% increase in tax on bank's investment in government securities and removing the cap on gas infrastructure and development surcharge resulted in negative sentiments in the market
  • Situation in power sector stood quite depress with IPPs giving final notices to government for invoking sovereign guarantees
  • As public sentiment boiled over power outages, government finally released Rs23bn to power sector, whereas proposed TFC of Rs82bn has also been finalized to be floated next week in order to raise funds to limit circular debt
  • Remittances rise to US$ 1.14bn during Apr-12, 10.7% YoY
  • Cement sector local dispatches up 9.5% YoY in Apr-12
  • For fertilizers, a voluntary Rs145 per 50 KG bag (to Rs. 1650) cut in urea prices was seen as the viable step needed to clear record high inventories and remain competitive with lower - priced imported urea. More urea imports are expected as Pak-Iran barter trade deal has been resumed
  • The key fertilizer stocks like FFC, FFBL, ENGRO and FATIMA recorded price performance of -5.6%, -2.9%, 3.4% and -1.5% respectively, during the week
  • GDP growth for FY12 at 3.67%
  • In order to tackle the circular debt issue, the government decided to raise Rs 70 billion from the reserves of Oil and Gas Development Company (OGDC) by issuing TFCs. During the week, the two key stakeholders of this issue, OGDC and Pakistan State Oil (PSO) witnessed mixed sentiment. OGDC underperformed the market by 1.9 percent, while PSO outperformed the by 5.7 percent.

Ibrahim Fibers, Colgate Palmolive, Unilever Pak Foods, Rafhan Maiz, Media Times Limited, Adamjee Insurance, PTCL, EFOODs, Lotte Pakistan PTA, ENGRO, PSO, ICI, HUBCO, Attock Refinery, DGKC, and Nishat (Chunian) Limited were the major gainers while K.E.S.C, TRG Pakistan, Pak Suzuki, United Bank Ltd, and Abbot Laboratories were major losers at KSE last week.

A close scrutiny revealed that market heavyweights including ENGRO (31%), PSO (25%), DGKC (15%), FFC (10%), NML (9%) and PTC (8%) recorded cumulative 98% contribution to overall market traded value this week while OGDC, PPL and EFOODS saw declines affecting a portion of market value.

The top-5 scrips at the futures counter holding 60% of the total open interest were ENGRO, DGKC, PSO, NBP and LUCK.

According to experts and analysts, the top picks for next week are PTC, FFBL, DGKC, FATIMA, PPL, PSO, OGDC, POL, NCPL and HUBCO. Our liking also extends to FFC, Lucky, DGKC and PTC where robust business models and strong fundamentals make these names a worthwhile play, while MCB continues to remain our preferred play in the banking space.

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

Written by: Rana Khurram

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