Karachi Stock Exchange Weekly Analysis 21 Sep, 2013

The Karachi Stock Exchange (KSE) market trend was bullish, banks’ support KSE to close the week in the green post rate hike. The Karachi Stock Exchange benchmark-100 index continued to witness positive rally for the third consecutive week. Underpinned by foreign flows (Week: USD10mn) and renewed local institutional interest, market closed in green zone. KSE – 100 index closed at 23,595.61 points by gaining 427.57 points or 1.8 percent. While KSE – 30 index closed at 18,072.41 points by gaining 182.03 or 1.02 percent.

Underpinned by foreign flows, improving global equity markets, renewed local institutional interest, favourable banking spreads and setting up of a high-level committee to curb grey traffic propelled investors to take positions. Average trading volumes increased by two percent on week-on-week basis to 244 million shares against 239 million shares; however, value in dollar terms fell by nine percent on week-on-week basis. Foreign portfolio investment saw inflows of $6.8 million against $2 million last week.

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

  • Amidst lack of impetus and underlining negative sentiments post last week’s 50bps hike in discount rate, KSE100 index tumbled below 23K level during the week
  • Strong interest in the banking sector (on the back of an anticipated recovery in spreads/core income)
  • Greater comfort on future FIPI post the US Fed’s decision not to cut its stimulus plan, lent strong support to the market mid week
  • Drilling down to sector performance, as highlighted above banks’ shone this week, outperforming the broader market by 8.7% as SBP’s hawkish tone suggested sharper and faster than earlier eyed interest rate hikes
  • E&P stocks were under pressure as receding Syria risk delivered moderation in international oil prices while the OMC and IPP chain felt the heat due to re-accumulation of circular debt (media reports cite this has risen to Rs165bn just 2-months after the government cleared outstanding stock)
  • Cement sector performance was also tepid, despite strong earnings announcements this week by Lucky Cement (LUCK: +43% YoY FY13 EPS of Rs30.04); Kohat Cement (KOHC: +59% YoY FY13 EPS of Rs20.45) and Pioneer Cement (PIOC: +155% YoY FY13 EPS of Rs6.76). The sector underperformed the KSE-100 by 2.9% as investors lent more credence to interest rate hikes dampening sector earnings rather than the news that APCMA has apparently resolved its internal tussle on cement prices and market share 
  • On the macro front, Pak Rupee exchange rate was in the eye of the storm, as it shed 0.7% of its value vs. the US Dollar this week alone
  • External account data released by State Bank of Pakistan depicted a weak Current Account reading with August 2013 deficit sharply rising to US$575mn vs. deficit of US$57mn in July 2013
  • However, U.S Fed’s unexpected decision to delay the unwinding of monetary stimulus in U.S and consequent rally in emerging markets brought interest back in local equities
  • The re‐emergence of circular debt to tune of PKR165bn despite various measures to curb the menace
  • Industry reports suggested improved plant utilization on continued gas supply which curtailed decline for ENGRO (-3%)
  • Telecom sector (+3%) also got an thrust after PTA installed a monitoring system to curb illegal voice and data communication
  • Federal government has drafted a new co‐generation policy for sugar mills, according to which all fiscal and financial incentives that are available to IPPs will be offered to mills
  • The majority shareholders of Unilever Pakistan Limited have applied for voluntary delisting of the company through buy‐back of shares from minority shareholders, said a statement. The proposed buy‐back transaction by the company has been approved by the Listing Committee of the Lahore Stock Exchange for PKR15,000/‐ per share subject to purchase of at least 199,400 ordinary shares of the total 3,312,452 shares 
  • Owing to the delay in finalization of the draft return form for the tax year 2013, the FBR has extended the last date for filing of tax returns and statements until October 31 
  • Pakistan Refinery Limited (PRL) will double its MS production from 144ktons to 270ktons
  • In the first auction after the hike in interest rate, the government raised PRs506bn through T-bills on against the target of PRs250bn
  • Foreign exchange reserves stand almost flat from previous week at US$10.374bn as of 12th September
  • CA deficit for 2MFY14 clocked in at US$632mn after a sizable deficit of US$ 575 million in Aug 2013
  • Government of Pakistan plans to slash PSDP expenditure by 28% to PkR 834 billion
  • The MoPnR has proposed to stop gas supply to CNG stations, captive power plants and fertilizer industry in the winter months
  • There are expectations of upcoming energy reforms including the second phase of power tariff hikes in Oct’13 and a possible announcement of SOE privatizations to drive sentiments
  • Going forward, a few more key results such as Maple Leaf Cement and Nishat Mills are in the pipeline and the week will also see futures positions to rollover to October contract

Top ten gainers of last week were: Pace (Pak), Jah.Sidd. Co., GlaxoSmithKline Pak., Shifa International Hospitals, Attock Cement, Pak Tobacco Co, Engro Foods Ltd, Bata (Pak) Ltd., Maple Leaf Cement and Bank Of Khyber.

Top ten losers of last week were: Colgate Palmolive, Hub Power Company, Javedan Corporation, Arif Habib Corp, Hum Network, Pak Services, Habib Bank, United Bank, Engro Corporation and Fauji Fert Bin.

Top ten volume leaders were: BOP, MLCF, FCCL, DGKC, BAFL, NBP, PTC, TRG, NIB and HMB.

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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