Karachi Stock Exchange Weekly Analysis 27 July, 2014

The Karachi Stock Exchange (KSE) market Volumes surge amid start of results season. rose by 249.86 points or 0.8 percent to close all time historical high of 30,474.75 points during the past week as compared to 30,224.89 points of previous week’s closing. The KSE-100 index gained 32 percent Week on week (WoW) higher average trading volumes of 173 million shares.

Volumes were robust, with ADTO picking up by impressive 32% WoW to 173mn shares. Similarly, average daily value traded rose by 21% WoW to US$91mn. Foreigners continued to support the market, with FIPI rising by 4% WoW to US$25.1mn in a small 4-trading-days week. The market will continue pricing in strong anticipated banking results, in addition to high payouts from energy stocks. On the flip side, cements may remain under pressure on the recent development. Trading activity in the Karachi capital market is likely to remain lackluster next week due to the Eid holidays, as only two days of trading will be observed in next week.

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

  • In the recent bi‐monthly monetary policy review, the State Bank of Pakistan (SBP), as largely expected, decided to leave discount rate unchanged at 10%. This is the fourth consecutive status quo decision made by the central bank 
  • The build‐up on the political front holds the key as it is widely expected that this saga will gather pace after Eid holidays. Unfolding of new political alliances and pressure tactics can unsettle the sitting government, which can be very unnerving for investors spoiling the jubilant mood at the bourse 
  • Imran Khan’s proposed long march on 14 August will be a key trigger for the market
  • The government may not change the petroleum products prices in the Aug‐14, which as per international trends are expected to increase in the range of PRs1.4/l to PRs4.5/l
  • Pakistan’s Fatima Group Principals and US‐based Midwest Fertilizer Corporation have signed a memorandum of understanding with an Italian petrochemical contractor Maire Tecnimont to undertake Engineering, Procurement and Construction (EPC) study for a US$1.6bn nitrogen fertilizer complex in the US. The work is expected to be completed in 2018 
  • Banking results started coming in during the week ‐ very strong earnings posted by Askari Bank (up 12.7% WoW) and HBL (‐0.8% WoW) indicate vigorous outlook on upcoming sector‐wide profitability expectations 
  • Bestway Cement has acquired Lafarge Cement at an EV of US$329, which translates into an acquisition price of PRs19.7/sh
  • IMF’s fourth review discussion will commence on August 6, which will be keenly tracked
  • The result of the Fauji twins didn’t offer much excitement in spite of FFBL’s higher than expected dividend
  • AKBL surged sharply during the week (↑13% W/W) driven by a startling turnaround in its operations and an unexpected dividend
  • HCAR feasted on another round of price appreciation (↑5% W/W) showing a staggering increase in its profits, led by stout margins in the wake of currency gains
  • Delay in CHCC’s expansion plans has already pushed the script deep into greener meadows as the stock has advanced by 37% during the last two weeks
  • Announcement of the telecom policy in the near term will provide clarity to the sector. The upcoming telecom policy has envisaged that PTA and CCP will prepare a joint MoU to clarify their respective roles in the sector. The sector will increasingly be managed through the application of a Competition Framework. PTA, working with the CCoP, will develop a Competition Framework for the telecommunications sector
  • The energy space may lack the spice from an earnings point of view, but strong payout expectations should keep investors interested
  • Foreigners have been very active in the market lately, with inflows of USD57.5mn MTD (USD14.46mn in the outgoing week). The major portion of foreign buying has been concentrated in the Oil and Gas sector driven by attractive valuation levels
  • ADB is likely to finance a Punjab government’s project to improve the quality of life of residents in the selected intermediate cities of the province 
  • Bestway Group has acquired the Co‐op pharmacy business for USD620 mn
  • PC has decided to appoint a consortium, led by Dubai Islamic Bank, as financial advisers for the privatization of PIA. Another consortium, led by E&Y and UBL has been appointed as financial advisers for Fesco
  • Stability in textile exports due to GSP plus status from European Union narrowed the country’s trade balance in the FY14 by 2.48% to USD19.98bn as compared to USD20.49bn in same period last FY13 
  • MoF, GoP has released the sum of PKR2.85bn to PSM. The amount is the third installment of the first tranche of the approved restructuring package of PKR18.5bn from the GoP 
  • Pakistan has assured IMF for bringing down the inflation rate within a range to 6‐7% by FY16 from the current level of 8.8%,. The commitment was made with the IMF when Pakistan entered into an EFF programmed for SDR USD5.393bn in even quarterly installments over a period of 3‐years subject to successful quarterly reviews 
  • NEPRA cut consumer tariff by 8 paisa/unit for Wapda''s Discos for a month, in a bid to pass on lower average power generation cost for June 2014. Nepra held a public hearing in response to a petition filed by the CPPA

Top ten gainers of last week were: EFU General Ins, EFU Life Assur Ltd., Askari Bank Ltd., Cherat Cement, ICI Pakistan, Attock Cement Ltd, Hum Network Ltd, Bata (Pak) Ltd., Lotte Chemical Pakistan and Abbott Lab

Top ten losers of last week were: Agritech, Pakistan Cables, Shezan International Ltd., K‐Electric, Kohat Cement, Sui South Gas, Pak Services, D.G.K.Cement, TRG Pakistan Ltd and Century Paper.

Top ten volume leaders were: LPCL, MLCF, FCCL, AKBL, BOP, DGKC, AICL, LOTCHEM, CHCC, ENGRO and NBP.

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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