Karachi Stock Exchange Weekly Analysis 17 June, 2012

The Karachi Stock Exchange (KSE) market was bullish because of approval of the finance trading bill by National Assembly. KSE – 100 index has reached 13,665.80 points by gaining 107.10 points or 0.78 percent. The KSE 30-share Index surged by 77.91 points, or 0.66 percent, to 11,786.87 points.

According to experts, The Karachi Stock Exchange (KSE) is expected to slightly improve next week, as it is stable now after absorbing major technical sell-off seen in the weeks prior to the outgoing one. The market may cover miles in the upward direction if Pakistan-US ties improved with particularly regarding NATO supply lines issue. If the supplies are restored, this will help ease external pressure on Pakistan’s economy, as the United States would reimburse those funds, which Pakistan has so far spent on the war on terror. This will also stabilise the rupee in parity with the dollar and other major currencies and convince foreign investors to stage a come back in Pakistan.

The turnover decreased 12.28 percent and traded 109.14 million shares as compared to previous week’s 124.43 million shares. The average daily turnover fell by 9.3 percent to 86 million shares from 95 million shares traded in the previous week. Market capitalisation, however, surged by Rs22 billion to Rs3,490 billion.

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

  • National Assembly has approved the finance bill, which has cleared all the ambiguities regarding CGT (Capital Gain Tax) regime helped in drawing interest of investors
  • The stability has returned in notable commodities (such as crude oil) at world markets. This should pave the way for improvement at the local bourses
  • Cement offtake for May increased by 5 percent on yearly basis
  • Lucky Cement interested in acquiring 75.8% stake in ICI Pakistan
  • In the previous week, foreigners sold net stocks worth $83.6 million. This included the strategic divestment of 200 million shares of Hubco at Rs31 per share, totaling to $66 million
  • Punjab government in its provincial budget announced continuation of the Yellow Cab and Green Tractor scheme for fiscal year 2012-13. That’s why PSMC (Pak Suzuki Motors Company Limited), which is the major beneficiary of Yellow cab scheme outperformed the market by 4.6 percent
  • The international power deal of Hubco was finally executed this week, which would result in Hubco being largely owned by local investors
  • As per recent data released by SBP (State Bank of Pakistan), remittances in May‐12 grew slightly by 4% MoM to US$1.19bn. Cumulatively in 11MFY12, remittances are up 19.5% to US$12.07bn in 11MFY12 due to improved banking channels
  • The MSCI Annual Review (due on 20th June) could instill some life in the market if Pakistan related positive takeaways emerge.

Philip Morris Pak Ltd, Media Times Limited, Standard Chartered Bank, Rafhan Maize, HUBCO, Fauji Fertilizer Bin Qasim, DGKC, HBL, PTCL, UBL, Lafrage Pakistan, ICI Pakistan Ltd, Nishat Mills Ltd, and Pak Suzuki Motors were the major gainers while Sui Northern Gas Ltd, Unilever Pakistan Foods, Ibrahim Fibers, Indus Dyeing, PSO, Lucky Cement, and Pakistan Tobacco Company were major losers in the benchmark KSE-100 this week.

Cement sales in 11 months of fiscal year 2011-12 stood at 29.5 million tonnes, up by 3.0 percent on yearly basis. The growth was largely driven by improved local sales, up 8.0 percent. In May alone, cement sales were recorded at 2.9 million tonnes (up 5 percent) in which local despatches surged by 10 percent on yearly basis while exports were down 6.0 percent. However, during the week construction and material sector underperformed the market by 1.3 percent.

Hubco remained in the limelight because of the National Electric Power Regulatory Authority’s notification regarding the post Commercial Operation Date (COD) Narowal tariff. It is expected to positively impact the earnings of the company. During the week, Hubco outperformed the market by 3.6 percent.

We see value in accumulation of fundamentally strong names such as PPL, APL, PSO, OGDC, POL, Hubco and NCPL  in the energy sector, and MCB among banks. Other than this, Fatima Fertilizer and EFoods also warrant closer attention given sound business profiles and attractive upsides.

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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