The market failed to make substantial gains despite strong corporate results and positive triggers, only managing to grow by 0.3% (36 points) during the week ended October 28.
There were only four trading sessions during the week after Monday was declared a public holiday and activity remained thin throughout the week as average volumes declined by 12.6% during the week.
After witnessing back-to-back declines in the first three sessions, the market recovered on Friday and climbed 2.5%, as investors flocked to purchase shares trading at attractive valuations.
Several blue chip companies announced their earnings for the quarter ended September 30 during the week. The all-important oil and gas sector was at the forefront as the Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL) announced strong earnings for the quarter. OGDC announced earnings growth of 31%, with earnings per share (EPS) of Rs5.1, which was 10% above the market consensus and surprised investors. PPL also posted earnings growth of 28% with EPS of Rs7.52.
Earnings of major banks were also released, MCB Bank and United Bank Limited posted earnings growth of 24% (EPS: Rs18.55) and 36% (EPS: Rs8.95), respectively. While the National Bank of Pakistan posted flat growth with EPS of Rs6.78.
There was further good news for the banking sector as the State Bank of Pakistan extended the forced sale value benefit offered to banks for up to five years, which is expected to have a positive impact on the earnings of banks.
For the fertiliser sector, the earnings of Fauji Fertiliser Bin Qasim were announced, which posted massive earnings growth of 145% with EPS of Rs7.68. FFBL’s parent company, Fauji Fertiliser is expected to announce its earnings in the coming week.
There was positive news for the cement sector as well with cement dispatches up by 9% year-on-year for the first quarter of the fiscal year. Local sales of cement were up by 12%, while exports also increased by 2%. The news comes as a relief for the cement sector which suffered during a torrid fiscal year 2011.
Nonetheless, the strong results and positive triggers failed to make an impression on the market, which also suffered from the continuous outflow of foreign funds. Net outflow of funds stood at $7.68 million for the week.
Average daily volumes stood at 75.2 million shares per day, while average daily value only fell by 22.9%. The KSE’s market capitalisation grew 0.1% to Rs3.02 trillion by the end of the week.
What to expect?
The coming week will witness the earnings announcements of major fertiliser companies, namely, Engro Corporation and Fauji Fertiliser.
As a result, a lot of activity can be expected in the sector. Engro’s stock has taken a beating in recent days, due to the closure of its old plant for maintenance. Domestic politics can also affect market sentiment, while the direction of foreign flows will also be a key determinant of the market’s direction in the coming week.
Monday, October 24
Stock market was closed on Monday as a public holiday was announced to mourn the demise of Begum Nusrat Bhutto.
Tuesday, October 25
The stock market closed flat after gaining over 100 points in early trade. Selling was witnessed in the trading session as investors preferred to book profit at higher levels.
Wednesday, October 26
Selling spree was witnessed at the bourse as negative triggers haunted the stock market. Media reports about closure of gas to key industries ahead of the winter season dragged down investor interest.
Thursday, October 27
The stock market dropped as investors opted to sell across the board. Index blue chips Pakistan Petroleum fell 2.4% and MCB Bank dropped 4.8% to close near its lower limit, which led the benchmark KSE-100 down.
Friday, October 28
Equities rocketed on the last trading session of the week, ending a four-day downward trend as investors aggressively bought fertiliser and oil stocks.
Positive regional markets and attractive values in oil, bank and fertiliser stocks led to the flurry of activity in almost all blue chip stocks.
Published in The Express Tribune, October 30th, 2011.
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