Karachi Stock Exchange Weekly Analysis 20 May, 2012

The Karachi Stock Exchange (KSE) market is continued to suffer heavy losses for the second consecutive week. The Karachi Stock Exchange (KSE) is likely to take its cue from the trend of global stock markets next week. KSE – 100 index has dropped from psychological level of 14,000 and 13,900, and reached 13,857.78 points by losing 372.71 points or 2.61 percent. While the KSE 30-share index decreased by 392.59 points, or 3.17 percent, to 11,980.80

Average volume plummeted by 45% and stood at 144 million shares per day compared to 261 million shares per day in the previous week. On the macro front, the country’s current account stood with a deficit of $3.39 billion for 10 months of the current fiscal year compared to a surplus of $446 million in the same period last year. The turnover dropped 25.84 percent and traded 175.70 million shares as compared with previous week’s 236.94 million shares.

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

  • Profit taking was witnessed especially from foreign portfolio investors. They have chose to cash in on the recent highs touched by the index and have offloaded $6 million worth equity during the week as their native markets continued to decline due to Euro zone debt crisis remained unresolved yet
  • As the federal budget is approaching (expected on 1st June, 2012), investors are very cautious and are hesitated on heavy investment
  • Pak-US relations are improving because Pak government has allowed supplies for US embassy in Kabul to cross into Afghanistan from Pakistan. Military and civilian aid is also expected in upcoming weeks
  • Government to extend PRs12.2bn sovereign guarantee to NITL
  • LSM sector records poor growth of 1.05% in 9MFY12
  • MoF considering local urea procurement proposal; Iran deal not likely
  • Government raises PRs143bn in T-bill auction
  • Current account deficit swells to US$3.39bn in 10MFY12

Philip Morris Pak Ltd, Tandlianwala Sugar, E.F.U. General Insurance, BYCO Petroleum and Pak Suzuki Motors were the major gainers while Media Times Limited, Lotte Pakistan PTA, Agritech Limited, D.G. Khan Cement and Pak. Int. Cont. Ter. Ltd. were major losers in the benchmark KSE-100 this week.

In the prevailing scenario, we advocate a cherry picking approach and advise an accumulation stance on PPL, APL, PSO, OGDC, POL, Hubco and NCPL (our top picks in the energy chain). We also see upside potential in FFC and PTC which boast strong fundamentals. In the banking space, MCB is our preferred play and we also add EFoods to our recommended list.

The cement sector came under pressure, after prices of cement bags were reduced by Rs25 in the northern region of the country. The sector, which has been the outstanding performer of the year, saw shares take a plunge as Lucky Cement and DG Khan Cement dropped 4% and 9% respectively.

Habib Bank Limited was on the receiving end as it was removed from the MSCI frontier index. The removal reduced Pakistan’s representation in the index from 4.7% to 4.4% and resulted in the HBL’s share dropping by 2% during the week.

The energy sector got some relief with the issuance of Rs82 billion worth of TFCs with the aim of resolving inter-corporate debt. Activity was also witnessed in the oil and gas sector where Pakistan Petroleum announced plans for acquisitions and to invest internationally, in Iraq. PPL is to bid for corporate acquisition of MND Exploration and Production Limited, the company has assets in Pakistan and Yemen. Moreover, Petroleum Ministry has sought GoP’s approval to authorize PPL to pursue Iraq’s exploration opportunity on standalone basis with US$100mn limit, or pursue a larger exploration programme in joint venture with another company. However, PPL underperformed the market by 0.2%WoW.

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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