Karachi Stock Exchange Weekly Analysis 15 July, 2012

The Karachi Stock Exchange (KSE) market has witnessed lackluster activity and a volatility ahead of corporate results. KSE – 100 index has reached 14,332 points by gaining 22 points or 0.2 percent. While KSE – 30 index has reached 1 2,402.31 points.

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

  • The current standoff between the judiciary and the government over the contempt of court issue kept the investors cautious
  • Moody's Investors Service decision to downgrade Pakistan's foreign and local currency bond ratings (to Caa1 from B3) further dampened the investor sentiment
  • Government may ask Supreme Court's permission to treat three RPPs as IPPs
  • Government borrowed PRs 308 billion through T‐Bill auction
  • There are expectations of relaxations for financing rules, which would be the positive trigger to drive market in green zone
  • Foreigners maintained their interest in the market as they were net buyers of shares worth US$ 5.3 million
  • Result season kicked off this week. FFBL announced below consensus earnings of Rs644mn (EPS: Rs0.69) in 1H2012, depicting a decline of 82%YoY. Further disappointment came, as the company did not announce any cash dividend. Resultantly, the stock underperformed the market by 8.2%.
  • Pakistani cement manufacturers have reduced export price for India by 13% due to appreciation of the greenback versus the rupee
  • Despite some decline in urea prices on the international front, the federal government's decision to import 300,000 tons of urea for Kharif season will cost the national exchequer $135 million
  • The government is following a comprehensive package to provide relief to the consumers before upcoming election by ending load ‐shedding, reducing gas prices and freezing power tariff, say government officials
  • Pakistan made a record import of 178,199 tons of petrol in June 2012 to meet surging demand, figures of Oil Companies Advisory Committee (OCAC) revealed
  • Oil and Gas Regulatory Authority (OGRA) has sent a summary to the government for increasing petroleum prices

Colgate Palmolive, Thal Ltd, NIB Bank, Agritech Ltd, HCAR, Askari Bank Ltd, Pak Suzuki Motors, UBL, Lucky Cement, Sui Northern Gas Ltd, Sui Southern Gas Company Ltd, ABL, DGKC, Shell Pakistan, Adamjee Insurance Company, and Soneri Bank were the major gainers while Fauji  Fert Bin Qasim, Ibrahim Fibers, Grays Of Cambridge, Fauji Cement, ULEVER, ENGRO, EFOODS and Pace (Pak) Ltd were major losers in the benchmark KSE-100 this week.

Top 10 volume leaders of last week were: DAWH, EFOODS, JDWS, FFBL, NIB, LUCK, FATIMA, BAFL, FCCL, and FFC.

Trade deficit surged by 36%YoY in FY12 to US$21.3bn. Higher international oil prices augmented the import bill as imports rose by 11.1%YoY to US$44.9bn. While exports during the year declined by 4.7%YoY to US$23.6bn. Energy shortage coupled with lower cotton prices kept the overall exports relatively constrained. Remittances on the other hand increased to US$13.2bn in FY12 against US$11.2bn recorded last year. In June 2012, remittances were up by 1%YoY to US$1.1bn.

We look forward to corporate results infusing some excitement in the market given the payout‐intensive nature of the June quarter. Lucky Cement, UBL, Hubco and EFoods showcase the list of big ticket names due to announce their results next week. We see pockets of opportunity and recommend investors to build positions in stocks such as PPL, APL, PSO, OGDC, POL, Hubco and NCPL in the energy sector. Among banks MCB is our preferred play while Fatima Fertilizer, Lucky Cement and EFoods also warrant a closer look given favorable operating dynamics and upside potentials.

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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