Karachi Stock Exchange Weekly Analysis 18 August, 2012

The Karachi Stock Exchange (KSE) market performance was bullish after SBP’s decision of cut down the discount rate by 150 bps. KSE – 100 index has crossed the psychological level of 15,000 points since after April 30, 2008. KSE – 100 index has reached 15,000 points by gaining 238.51 points or 1.6 percent. While the KSE 30-share index rose by 191.40 points, or 1.50 percent, in the same week and ended at 12,877.92 points.

According to analysts the KSE would maintain the upward drive next week too because the market is yet to fully absorb the aggressive rate cut by the State Bank of Pakistan.

The average daily turnover increased by 158 percent to 155 million shares in the outgoing week from 60 million shares traded in the previous week. Market capitalisation rose by Rs60 billion to Rs3,827 billion. Foreigners were net buyers of $35.6 million during the week (inflated by one-off $30 million off-market transaction).

Macro indicators showed a mixed trend as trade deficit (increase by 4.77%YoY) and foreign direct investment (down by 50%YoY) portrayed a weak picture, while remittances (up by 9.9%YoY) remained among the few bright spots on the macro landscape.

Local participants turned cautious ahead of holidays. The stocks likely to feel the heat of visible threats in economy as reflected in the earnings and payouts either continued to face renewed selling mainly as a part of sector and stock swapping strategy, or failed to invite fresh buying.

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

  • State Bank of Pakistan has announced its next monetary policy. In which they have proposed 1.5% cut of interest rate and lead it to 10.5 basis points
  • The cut down of discount rate have made a significant positive impact in market’s movement
  • Strong valuations in the earnings announcements session and the renewed foreign interest in oil sector has also played a catalyst role in the bullish sentiment
  • Investors also took positions in leveraged stocks cement, fertilizer and textile sectors on expectations of strong earnings outlook on discount rate cut 
  • Strong earnings announcement by Pakistan Petroleum Ltd and hopes for fall in consumer price index inflation for August also played a catalyst role in the bullish sentiment 
  • In the 1st PIB auction after the discount rate cut, cut-off yields decreased by up to 137bps taking their cue from the SBP’s 150bps rate cut to 10.5%. Cut off rates for 3, 5 and 10 year PIB are now at 11.30%, 11.70% and 12.05% respectively
  • The government has decided to transfer the function of domestic oil price determination to oil marketing companies effective 1st September. Currently, Oil & Gas Regulatory Authority (OGRA) sets local prices in consultation with the government, Now Marketing firms have to fix the oil prices
  • Result season is on its peak, several blue chip results are still pending which are expected to keep the excitement high
  • We underline that the resumption of NRO case hearings where the prime minister is scheduled to appear before the bench on August 27 warrants attention 
  • Nepra issued a notification, allowing KESC to raise its tariff by PKR1.66/unit. The price increase was made to compensate for fuel adjustment charges 
  • The first month of the current financial year proved shocking for car assemblers owing to 39.4 % drop in their sales
  • Serving over 5 million consumers nationwide every day, Engro Foods has excelled in the local dairy industry with a compound annual growth rate (CAGR) of 65% in past 7 years and has chalked out plan infrastructure investment in 2012 to the tune of PKR 8 billion
  • Acute energy crisis, poor law and order situation and low domestic demand has enormously slowed Pakistan’s large‐scale manufacturing (LSM) growth as it grew by only 1.17% during July‐June 2011‐12
  • Government may allocate dormant gas fields to fertiliser industry
  • The government is planning to withdraw all duties and taxes on import of liquefied petroleum gas (LPG) cylinders, kits and related equipment to encourage the setting up of LPG stations in the country and discourage demand for compressed natural gas (CNG) in the face of natural gas shortage
  • Pakistan has decided to carefully examine the impact of sanctions against Iran before the sale of a million tons of wheat (initial deal is only for 100,000 tons) under barter trade deal at US$ 300 per ton

K.E.S.C., Colgate Palmolive, Media Times Limited, Lafarge Pakistan Cement Ltd, Fauji Cement Company Ltd., Pak Petroleum Ltd., Hub Power Company Limited, Pakistan Telecommunication, Pakistan Oilfields Ltd., Nishat Mills Ltd., DGKC, Engro Polymer, Askari Bank Ltd., Kot Addu Power Bata (Pakistan) and International Steel Limited were the major gainers.

While Soneri Bank, United Bank Limited, Shell Pakistan, Tri-Pack Films, Security Paper Ltd., Dawood Hercules, Faysal Bank, Pakistan Cables, Standard Chartered Bank, Allied Bank and Dawood Corporation were major losers in the benchmark KSE-100 this week.

Top 10 volume leaders of last week were: FCCL, KESC, DAWH, JDWS, BAFL, AKBL, KAPCO, NML, LUCK and PTC.

Top average daily turnover for week: FCCL, KESC, LPCL, DGKC, and JSCL

Thank you very much for reading this article, we wish all our readers Happy Eid Greetings.

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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