Karachi Stock Exchange Weekly Analysis 3 June, 2012

The Karachi Stock Exchange (KSE) market was range bound and activities were remain stagnant. KSE – 100 index has reached 13,876.97 points by losing 48.09 points or 0.34 percent. According to experts and analysts Karachi Stock Exchange (KSE) benchmark 100 – index will reach the psychological level of 14,000 points in upcoming week because the federal budget 2012-13 for multiple sectors would have a neutral – to – positive impact on market.

The average daily turnover fell by 10 percent to 141 million shares from 156 million shares in the previous week. Market capitalisation declined by Rs10 billion to Rs3,552 billion. And foreigners sold net shares worth $0.01 million.

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. But there are hopes over normalization of Pak-US ties with reference to NATO supply lines would also have a positive impact especially for foreign portfolio investors
  • The massive reduction in crude oil prices in world market would also relief the economy from external front 
  • Pakistani Rupee has been depreciated against US$ to the record lowest value of history
  • Uncertainty in political front, widening fiscal deficit, energy shortfall and declining exports may adversely affect the sentiments of investors
  • Government has announced cut in petroleum prices up to 7.9%
  • Prime Minister of Pakistan, Yousaf Raza Gilani, does not file appeal in contempt case
  • As per the media reports, the government is considering to levy 16% GST on printed price (retail price) of cement, fertilizers and bottled water instead of current application of GST on ex‐factory price with an objective to minimize exceptional increase in dealer margin and increase sales tax revenue
  • Next monetary policy was due in mid-June and given conflicting political and economic considerations, will be keenly watched
  • The revival of ties would pave the way for the receipt of $400 million reimbursements under Coalition Support Fund in June

Attock Refinery, P.I.A.C. (A), Silkbank Limited, IGI Insurance and Shifa Int Hospitals Ltd were the major gainers while Media Times Limited, Unilever Pakistan Foods, Pak Services, TRG Pakistan and Pace (Pak) Ltd were major losers in the benchmark KSE‐100 this week.

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). In the banking space, MCB is our preferred play while EFoods also warrants a closer look. With the fertilizer sector continuing to face pressure on both sales volume and margins in addition to gas supply woes, Fatima Fertilizer emerges as top pick in the sector.

According to experts, cement and fertilizer stocks may jack up share prices. The reduction in federal excise duty for cement by Rs100 per ton to Rs400 should continue inviting investors’ attention towards relevant stocks. Though the government has proposed an additional gas cess of Rs103/mmbtu for fertilizer manufactures but it would not impact earnings of concerned companies in the quarter to be ended on June 30, 2012. Moreover, the proposal would also help fertilizer companies attracting dealers to buy its ready stocks in stores. Thus, it would help fertilizer companies to offload heavy inventories of fertilizer before the quarter to be ended and show cash on balance sheet.

Furthermore, a news report regarding the hike in gas development surcharge kept investors interested in the chemicals sectors.

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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