Karachi Stock Exchange Weekly Analysis 27 May, 2012

The Karachi Stock Exchange (KSE) market was range bound and activities were remain stagnant. KSE – 100 index has reached 13,925.06 points by gaining 67.28 points or 0.5 percent.

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

  • Unresolved NATO supply issue coupled with worsening law and order situation in the city hurt investor sentiment 
  • As the federal budget is approaching (expected on 1st June, 2012), investors are very cautious and are hesitated on heavy investment. The most anticipated budget will set the directions of market for the future
  • A reversal of trend was seen from foreigners as they bought shares worth $12 million after last week’s selling 
  • TCP (Trading Corporation of Pakistan) has finalized the import of 0.1 million tons of Urea. The bid is approved of worth US$ 522.86 per ton
  • Pakistan banking spreads contract 8bp MoM to 7.22% in April 2012
  • SBP (State Bank of Pakistan) has announced that FX reserves have been increased by US$ 207 million and reached up to US$ 16.31 billion
  • Pak rupee has been depreciated to its ever high peak i.e. 1 US$ = Rs. 92.35
  • Rs873bn is proposed for PSDP in budget FY13
  • Banks NPLs down by 5.6% in 1QCY12
  • Remittances up by 20.2% YoY to USD10.9bn in 10MFY12
  • Govt is planning to import 500MW of power from India
  • Power rates up by Rs2.38/unit, Inflation to fuel further
  • Textile sector to continue facing 500mmcfd gas shortfall
  • A reversal of trend was seen from foreigners as they bought shares worth $12 million after last week’s selling 
  • Uncertain global stocks and lower global commodities on possible Greece exit from eurozone and limited foreign interest also affected the market sentiment

TRG Pakistan, Fauji Cement, Engro Corporation, Pak Services and Pakistan Reinsurance were the major gainers while Media Times Limited, E.F.U. Life Assurance, Dreamworld Ltd, Adamjee Insurance and Shell Pakistan were major losers in the benchmark KSE-100 this week.

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

We advocate a cherry picking approach and advise an accumulation stance on PPL, APL, PSO, OGDC, POL, Hubco, NML, DGKC, FCCL and NCPL (our top picks in the energy chain). In the banking space, MCB is our preferred play while EFoods also warrants a closer look.

Fertilizer sector were hard hit over the reports of potential increase in development cess on feedstock gas by 52% to PRs300/mmbtu, as producers’ ability to pass‐through the impact of PRs131/bag (with GST) hike remains uncertain. We estimate this could hit earnings by 6%/7.5% for FFBL and FFC 2012E in a worst-case scenario.

However, positivity was seen in cement sector scrips, which followed another increase of Rs10/bag during the week and expected Rs873bn allocation for PSDP in budget which will further boost cement demand going forward.

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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