Karachi Stock Exchange Weekly Analysis 21 June, 2014

The Karachi Stock Exchange (KSE) market witnessed a significant correction this week, closing at 28,692, compared to 29,731 last week. The Karachi Stock Exchange KSE-100 index lost 1,039 points, or 3.5 percent, in the week on solid correction, Volume activity in terms of value traded witnessed attrition of 26.6% WoW to US$75.1mn. Weekly flow of net foreign investment was only US$3.6mn, a significant slowdown from recent weeks. KSE-100 index lost 1,039 points (- 3.6% WoW) during the week, primarily on the back of political noise.

Next week would most likely be event driven with political noise in limelight with the return of religio-political leader and possible protests in the province of Punjab, further clarity on the Lahore incident and commencement of the government’s appeal against the removal of Pervez Musharraf’s name from the exit control list (ECL) in the Supreme Court. Investor interest also weakened during the week as average volumes clocked in at 101.9mn, down 34% WoW. Foreigners’ interest diminished during the week as foreign investors bought shared worth a mere ~USD3.6mn against USD12.6mn in the previous week.
Following news have played vital role in Karachi Stock Market index movement:

  • KSE100 index closed the week little changed in volatile trading as late selling in PM session wiped morning gains
  • Institutional buying interest at lows provided the much needed support, however investors continued to remain cautious and confused as politics continues to play a key role
  • Pakistan Telecom PTC PA - 4.9% hit intraday lower circuit but managed to close above; stock has fallen by over ~15% in past three trading sessions after ICH was disbanded earlier this week
  • United Bank UBL PA -0.83xx% exchanged over 5mn shares on second consecutive day as reported FII institutional activity played on both sides
  • Cements and select oil names continue to play in a narrow range as leading players remain sidelined
  • A truly happening week on the political front as Pakistan Army launched a full scale operation against militant hideouts in the North Waziristan which Government also endorsed by taking all parties on board
  • Investors welcomed the military operation but the bull run soon ended following violence in the city of Lahore that remains a highly polarising political issue
  • Stocks depicted weakness across the board with index heavy weights namely MCB, OGDC, PSO, PPL and PTC dragged the index by 85, 84, 81, 67 and 51 points respectively
  • Zarb-e-Azb: Full scale assault begins in North Waziristan
  • Budget deficit likely to surge by 0.9%
  • Gradual increase in GIDC under consideration
  • Unsatisfactory progress: IMF puts off fourth review of Pakistan’s economy
  • Reserves increase to USD13.571bn
  • PSMC: A major catalyst on the horizon: The Punjab Government in its provincial budget FY15 has re-launched the Yellow Cab Scheme with an allocation of PKR25bn. PSMC remains the prime contender for the scheme as it enjoys hegemony in the <1300cc category
  • MCB: Estimates revised up; reiterate Sell: We reiterate our sell call despite upward revision in estimates as it currently trades at an expensive multiples (CY14E PBV of 2.8x and PER of 14.5x)
  • Autos: Volumetric triggers priced in: Auto sector is expected to remain in limelight where we expect volumetric growth on account of much awaited Corolla 2014 model and from Punjab Taxi scheme. Major impact of these developments would accrue to INDU, PSMC and THALL.
  • IPPs: Cash flow concerns unlikely to hurt payout capacity: As per news flows, fifteen IPPs have served notices to PEPCO for the payment of PKR66bn. However, government guarantees have not been invoked yet.
  • Investors would likely be watchful of political situation next week while PPL’s privatization would also remain in limelight  
  • Indus Motor Company Ltd (INDU) is expected to unveil the new model of Corolla in Jul/Aug’14 which should provide a fresh trigger to earnings, unlocking substantial room for price appreciation in the stock 
  • Market participants seem to wait for the arrival of PAT leader on Monday, which would set the next direction of the local index
  • A major Chinese group has purchased about 1/4 of land in an industrial zone, run by the FIEDMC, and is expected to make an investment of USD2bn to set up a big cotton spinning facility 
  • PM inaugurated the Mehar Gas Processing Plant which will produce 30mmcfd and 3,300bpd. MoD, MoP Board Member of OMV; Erwin Kroell, SVP Middle East and Caspian Region; and Axel Welch, Austrian Ambassador were also present during the inauguration ceremony 
  • NHA that work on Karachi‐Lahore motorway project is in full swing, dispelling the impression that the project has been put on the back burner. With reference to a news item appeared in Daily Times on June 11, a of the authority maintained that the contents of the story are baseless 
  • BoD HUBC has approved equity investment in SECMC of up to USD20mn and development of projects to establish coal‐based power plants up to 660MW
  • US OPIC has approved a financing of up to USD100mn to develop and operate a 50MW wind power project being set up in the Jhimpir wind pocket, some 100km northeast of Karachi
  • The GoP is scheduled to conduct an Ijara Sukuk auction with a size of PKR49.5bn, the funds raised from this auction are believed to be used for the financing of the M3 motorway project
  • Investors will be keenly watching the outcome of PPL’s domestic secondary market offering and its pricing, whose domestic road-show is ongoing
  • Foreigners’ interest diminished during the week, as foreign investors bought shares worth $3.6 million against $12.6 million in the previous week
  • PTCL witnessed selling pressure after the government dissolved International Clearing House, while PSO also declined on uncertainty over the mounting circular debt
  • Pakistan State Oil was worst hit as news emerged that the circular debt level had hit Rs350 billion. The company’s share price plummeted 8.2% during the week
  • Institutional activity also declined ahead of June quarter-end
  • Cement and banking stocks remained in the green ahead of better earnings expectations for June-quarter

Top ten gainers of last week were: Pak Suzuki Motor, Shezan International Ltd., Javedan Corporation, Indus Motor, Shifa International Hospitals, Colgate Palmolive, Grays Of Combridge, Abbott Lab, Kohat Cement and Fauji Fert BinXD.

Top ten losers of last week were: Atlas Honda Limited, Muree Brewery Co Ltd, P.T.C.L.A, Shell Pakistan, B.O.Punjab, Attock Refinery Ltd., J.D.W.Sugar, Netsol Technologies, Azgard Nine and GlaxoSmithKline Pak.

Top ten volume leaders were: FCCL, PTC, LPCL, BOP, TRG, KEL, NBP, MLCF, UBL, DGKC, and SSGC.

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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