Karachi Stock Exchange Weekly Analysis 27 July, 2013

The Karachi Stock Exchange (KSE) benchmark movement was volatile which moves up a notch near all time peak. After notching up a 1.5% (+347 points) gain in the first three trading sessions of the week, the KSE-100 index witnessed correction towards the end of the week, closing up by a nominal 0.3% WoW (+68 points). KSE – 100 index closed at 23,497.07 points by gaining 68.14 points or 0.3 percent. Average trading volumes; however, increased by 40 percent to 302 million shares against 216 million shares, despite reduced working timings at the market. This week foreign portfolio investment saw flight of $138.01 million because of German Power Company’s exit from Kot Addu Power Company.

The market witnessed profit-taking during the outgoing week, as the index reached the record high level. The benchmark accelerated faster than anticipated posting a massive return of 11.86% on a month to date basis with average daily volume of 260 million shares. The volume traded was lower by 26% in contrast with preceding month average daily volume of 354 million shares. With the corporate earnings season kicking in, the market seemed poised to reach new heights in the coming weeks.

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

  • This week saw a major off‐market bloc deal going through with National Power (major sponsor of Kapco) off‐loading its 36% stake (317mn shares) to a consortium of local banks at PRs46/sh. Inclusive of this, FPI outflow for the week amounted to US$138mn
  • With the onset of the generally higher payout June 2013 result season, trading volumes at the bourse rose by ~40% WoW to 302mn shares
  • Cement sector was back inaction with CHCC, ACPL, LPCL and FCCL posted hefty returns of around 30% (Average). Reduction in coal prices may have triggered improvement in industry wide margins. Furthermore with ample cash in hand of cement manufacturers a new wave of expansion or BMR may result in efficiency gains for the industry 
  • Cement stocks gained on the expectation of better June-end results
  • Doomsday scenario was painted by investors about the prospects of fertilizer industry after international urea prices moved downwards to USD315/ton which reduces the gap between the international and local prices. It seems government is likely to increase the gas prices for the industry, the manufacturers may not be able to pass on the cost which results in margin attrition 
  • Investors shrugged off concerns on Banks’ slow core performance in light of an anticipated U-turn in spreads
  • TCP finalizes deal: 75,000 tons of urea to be imported at USD317/ton
  • IMF has agreed to enhance the amount of loan to USD6.5bn from its offer of USD5.3bn and the US onboard to plead Pakistan's case for a further increase to US$7.5bn
  • ADB and World Bank are also expected to chip in with up to US$500mn budgetary support apiece
  • According to FBR, The dividend received from Money Market Funds and Income Funds is taxable at the rate of 25% for Tax Year 2013 and onwards
  • A sanction order of PKR138bn has been issued. In total, PKR480bn circular debt, including PKR342bn payments made last month by government of Pakistan
  • SBP has further tightened the foreign currency business by putting more conditions on exchange companies
  • Government of Pakistan has decided to show the door to the contractual OGDCL whose appointments at key posts are questionable. The decision is being taken in light of the directions given by PM
  • The New management of Privatization Commission has decided to revisit the entire strategy of the previous government regarding offloading OGDCL exchangeable bonds in international capital market 
  • Following strong 2Q2013 results last week, the spotlight shone on PTC again this week (+10.1% WoW)
  • Etisalat, the Gulf’s biggest telecommunications operator, has hired Goldman Sachs Group Inc to advise on its planned bid for Pakistan mobile operator Warid Telecom. Etisalat and China Mobile, who have existing operations in the country, were seen as potential bidders
  • China continues to make positive noises on investment in Pakistan, citing a US$6bn investment in the power sector over the next 5-years
  • The Pak Rupee has shed 2.5% vs. the US Dollar in July 2013 alone
  • PPL (+3.2% WoW) was the E&P poster boy, announcing its 4th discovery in 3-months while KAPCO took a beating (-6.4% WoW) after International Power Plc offloaded its 36% stake in the company to local investors at Rs46/sh (28% discount to market price) 
  • Key results this week included 2Q2013 announcements by (1) Askari Bank (AKBL) which posted an unexpected loss and (2) Fauji Fertilizer Bin Qasim (FFBL) with belowexpected EPS partly compensated for by a decent cash DPS 
  • Askari Bank issued 55% rights (issue at par value of PRs10/sh); FFC & FFBL would subscribe
  • Nishat Chunian Limited (NCL) has acquired Taj Textile Mills Limited (TTML) at a reserve price of Rs350.1 million
  • Next week will be important as results of Engro Foods and Sui Southern Gas Company Limited are expected
  • Cement and oil sectors are likely to remain in the limelight because of expectations of strong results. The oil sector is performing well on the hopes for the resolution of the circular debt issue
  • Presidential elections are also being held next week, If the presidential elections go through smoothly, it will also have a positive impact over the market
  • Banking stocks remained volatile during the week on account of expectation of reversal of monetary easing, while weak result expectations brought selling pressure

Top ten gainers of last week were: Attock Cement, Fauji Cement Company, Attock Refinery, Siemens Pak Engg, Mari Petroleum, Lafarge Pakistan, Netsol Technologie, Thal Ltd, Cherat Cement and Pak Tobacco Co.

Top ten losers of last week were: Kohinoor Energy, United Bank, Askari Bank, Grays Of Combridge, B.O.Punjab, Fauji Fert Bin, Engro Foods Ltd, Kot Addu Power Co., Lotte Chemical Pakistan Ltd and  Pace (Pak).

Top ten volume leaders were: BOP, FCCL, LPCL, NBP, PTC, JSCL, BAFL, DGKC, ENGRO, and KESC.

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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