Weekly review: Stocks rally as focus shifts to earnings

KSE-100 index surges to 45-month high as foreigners buy $1.5 million worth of shares.

KARACHI:

There was no stopping the bulls at the country’s bourses as the market’s impressive rally continued, with the benchmark KSE-100 index closing a 45-month high after climbing 1.7% or 211 points during the week ended February 24.

The market’s upward march remained undeterred from the prevailing political noise and bleak economic scenario of the country, as several blue-chip companies announced impressive earnings for the period ended December 31.

The index’s ascent was aided by the finalisation of the debt-swap deal for the energy and power sector and the inflow of foreign funds, as foreigners were net buyers of $1.5 million during the week.

Turnover at the bourse was also impressive as average daily volumes shot up by 37% and stood at 240 million shares traded per day. Market volumes peaked on Tuesday when they hit a staggering 322 million shares, in sharp contrast to the 12 month average of 77 million shares.

Corporate results were the highlight of the week as Oil and Gas Development Company (OGDC), MCB Bank, United Bank Limited (UBL) and Pakistan Telecommunication Company announced their earnings.

The activity in OGDC’s stock was instrumental in the direction of the market during the week. Before the announcement, the increase in OGDC’s share price was the primary reason behind the 1% gain of the KSE-100 in the first three trading sessions.

The company announced earnings in line with market estimates, with earnings per share of Rs9.67. However, the cash payout of Rs1.5 per share disappointed investors and the resultant decline in OGDC’s share price pulled down the index on Thursday.

Both MCB Bank and UBL impressed with earnings per share (EPS) of Rs23.23 and Rs12.66, respectively. MCB Bank announced a cash dividend of Rs3 per share along with a bonus issue of 10%, while UBL announced a cash dividend of Rs6 per share.

The week also brought good news for the power sector as the debt swap deal of Rs134 billion was finalised and injected liquidity into the cash-starved sector.

With volumes peaking, average daily value, also increased 35% to Rs5.4 billion traded per day. The market capitalisation of the KSE increased 1.6% to Rs3.31 trillion.

What to expect?

With the earnings season coming to a close, the attention is likely to shift towards the political scenario, as both the contempt-of-court case and the memogate saga will resume in the coming week. At the current high levels, a correction is also likely, and investors should trade cautiously in the market.

Monday, February 20

The stock market closed slightly higher on the first trading session of the week as investors were busy selling and booking profits. Mid-cap stocks remained in the limelight as approximately half of all shares traded in the market were in five second tier stocks.

Tuesday, February 21

Volumes jumped to a 22-month high as investors participation rose on a flurry of banking sectors results in a volatile session.

Wednesday, February 22

The stock market managed to close in the positive territory led by index heavyweight Oil and Gas Development Company. Except for OGDC, most of the stocks witnessed profit taking after rising by 2% in the past five trading sessions.

Thursday, February 23

The stock market witnessed a breather from the recent upward spree as investors opted to book profits. Index giant Oil and Gas Development Company led the way as investors opted to sell.

Friday, February 24

The stock market rebounded sharply by closing at a 45-month high after profit taking pulled the bourse down a day earlier. Investor sentiments soared to new highs after rumours spread that the FBR has agreed in principle with the KSE management over collection of Capital Gains Tax through the exchange.

Published in The Express Tribune, February 26^th, 2012.