Karachi Stock Exchange Weekly Analysis 25 August, 2012

The Karachi Stock Exchange (KSE) market started the post-Eid week on positive note, after SBP’s decision of cut down the discount rate by 150 bps. The short week after Eid holiday finished with a flattish trend. KSE – 100 index has reached 15,039.18 points by gaining 39.18 points or 0.26 percent. While the KSE 30-share index has lost 17.87 points, or 0.14 percent and reached on 12,860.05.

Please note that KSE – 100 index has reached a highest level of since 53 months.

Volumes were impressive during the week, as average daily volumes stood at 269 million shares traded per day, up 73% over the previous week. However, most of the increased activity was witnessed in the second-tier stocks as average daily volume rose only 12% to Rs5.23 billion shares traded per day.

The market was supported further by renewed foreign interest, higher local petroleum, oil and lubricant prices and hopes for revival of gas supply to fertilizer units.

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

  • Government has allowed trading in Indian stocks as well. According to experts, it will create positive impact and beneficial for local market and investors
  • In the next week market direction will be set with respect to the Supreme Court’s deadline for the PM to write to Swiss authorities in connection with graft allegations against the President
  • 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
  • Telecom sector should remain in the limelight particularly if official notification arrives pertaining to ICH implementation
  • SBP declared the current account deficit of US$ 297 million while IMF principle payment of approximately US$ 397 million is likely to be made by GoP on Friday
  • ECC has approved reduction in duties on LPG equipment up to 10% to promote LNG as an alternative fuel to natural gas in the country
  • Government has allowed Exploration and Production (E&P) companies, operating in the local oil and gas sector, to have contracts with gas transmission/distribution companies and third parties for sale of their share of gas in Pakistan at negotiated prices in accordance with applicable rules and regulations
  • Petrol is increased by Rs 3 and 21 paisa per litre, High Octane PKR4 and 85 paisa per litre, Kerosene oil PKR3 and 52 paisa per litre and price of light diesel has been increased by PKR3 and 19 paisa per litre
  • Banks’ NPLs are extremely high and continuously rising in Pakistan. NPLs in Pakistan and Kazakhstan are increasing, while NPLs in the 2011 were 15.4% of the gross loans of Pakistan
  • The newly‐appointed chairman of the FBR, Ali Arshad Hakeem, hinted that the tax machinery is considering lowering tax rates to lessen the taxation burden on individuals
  • Fertilizer companies have heaved a sigh of relief on a GoP decision to ensure dedicated gas supply to fertilizer plants on SNGPL network by allowing them to buy the fuel directly from the gas producers
  • Engro gained 8.1% during the week as a result of these developments
  • The government has planned to increase crude oil production to 69,000 barrels per day during current financial year 2012‐13 in order to meet the growing energy demands of the country, a petroleum ministry official said
  • Total public debt of the country has touched its peak of 60% of the GDP under Fiscal Responsibility and Debt Limitation (FR&DL) Act, by June 30, 2012. Interest payments witnessed an increase of PKR 45 billion against the budgeted figures and total debt repayment and interest payments shot up to PKR 889 billion
  • Analysts said that the rupee depreciation and continuous decline in forex reserves due to Stand-by Arrangement installment payment to the International Monetary Fund had a negative impact on investor sentiment resulting in marginal gains 

PACE, TRG, KESC, Bata, Dawood Hercules, Silk Bank, PIAC, NIB Bank, ENGRO, PTC, HCAR, FFBL, FATIMA were the top gainers of the week. While Rafhan Maize Product, Pakistan Cables, Soneri Bank, Grays of Cambridge, Nestle Pakistan, Security Paper Limited, Philip Morris Pak, Pak.Int.Cont., PSO, BAFL, SHEL, ULEVER and FFC were the top losers of this week.

Top 10 volume leaders were: FCCL, KAPCO, PKGS, DAWH, JDWS, PACE, TRG, ENGRO, AKBL, and MARI.

LPCL (78.33 million shares), FCCL (47.05 million shares), KESC (39.22 million shares), PACE (33.03 million shares) and FLYNG (32.02 million shares) led volumes during the week.

While we now believe valuations for the broader Cement sector are stretched, we see value in selected scrips. At current levels, we also prefer NML and NCL from within the Textile space.

Thank you very much for reading this article.

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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