Karachi Stock Exchange Weekly Analysis 24 June, 2012

The Karachi Stock Exchange (KSE) market was lacklustre because of political uncertainty (Supreme court verdict against Yousaf Raza Gillani). KSE – 100 index has reached 13,730.82 points by gaining 65 points or 0.48 percent. While KSE 30-share Index enhanced by 79.67 points, or 0.67 percent, during the week and closed at 11,866.54 points.  According to experts, Shares at the Karachi Stock Exchange (KSE) are expected to book some gains in their prices next week ahead of fiscal year 2011/12’s closing on June 30.

The timid sentiment was vindicated by the decline in average volumes, down by 20%WoW to 69 million shares. Foreigners too remained cautious as they sold shares worth US$6.3 million. Foreigners may continue to offloading positions due to depreciations of Pak Rupee against the US dollar and other currencies.

The current account deficit (CAD) in May-12 was reported at US$ 414mn, while the 11MFY12 CAD registered at US$3.77bn as against a meager deficit of US$79mn reported in the same period last year. The worsening of the CAD is due to higher trade deficit (including goods and services) which rose by 47%YoY during the period. Foreign flows in the same period have also been disappointing with Net foreign investment dipping by 61%YoY to US$721mn in 11MFY12. The fall came on the back of energy crises and law and order situation. Foreign direct investment (FDI) dropped by 48%YoY to US$756.4 in 11MFY12 while foreign portfolio investment (FPI) registered an outflow of US$35mn in the same period.

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

  • Investors have opted to remain sideline because of the uncertainty in political front
  • Weak economic data (May’12 CA deficit up 50%MoM) due to which turnover remained relatively thin at the KSE
  • Sharp fall in commodity prices, particularly oil coupled with the weak PkR/US$ parity added to the sell-off during the week
  • Additional ambiguity for investors came as a result of the current US-PAK impasse
  • Pakistan weight-age remained unchanged in MSCI FM as U.A.E and Qatar didn’t get an upgrade to Emerging Market status
  • SNGPL has suspended the gas supply to Enven
  • The KSE informed that the benchmark KSE‐100 index will move to free float methodology, effective Oct 1st 2012
  • As per latest numbers released by Pakistan Bureau of Statistics (PBS), Large Scale Manufacturing (LSM) witnessed a growth of 1.02% in 10MFY12
  • 80 K tons of urea has been imported to Gawadar (50k) and Karachi (30k) ports. While the final consignment of another 30k is expected on 22nd June
  • Government of Pakistan has raised PRs. 48.8 billion from Ijara Sukuk option
  • Lower than expected FED cut (PKR5/bag), imposition of cess on captive plants, rumors of disconnect gas supplies to captive plants and steep decline in PKR value has led LUCK to underperform broader index by 9% in last 2 weeks
  • After a long delay, NEPRA has finally notified the post‐COD reference tariff for HUBC Narowal Power Project (HNPP)

SNGP, PSMC, OGDC, FFC, EFOODS, Mari Gas, Indus Dyeing, Pakistan Reinsurance, Bank Alfalah, Allied Bank, PPL, Fatima Fertilizer, Attock Petroleum, and E.F.U. Life Assurance were the major gainers while K.E.S.C., NML, LOTPTA, E.F.U. Gen. Insurance, AICL, INDU, PTC, Media Times Limited, Bestway Cement and Rafhan Maize were major losers in the benchmark KSE-100 this week.

Top volume leaders of last week were JSCL, DGKC, EFOODS, FFBL and ENGRO.

From an investment perspective, 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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