Market watch: Charging bulls thrust aside political, economic concerns

Published: May 4, 2012

Benchmark KSE-100 index surges 277 points.

KARACHI: The bulls continued their charge on Thursday; as investors rallied aggressively across the board, riding a wave of positivity generated by the recently-signed Capital Gains Tax (CGT) ordinance.

“[A] buying spree was witnessed today as local investors turned bullish after a massive inflow of $8 million by foreign investors a day earlier,” commented Murtaza Jaffar, analyst at JS Global.

Ahsan Mehanti, director at Arif Habib Corporation, said that “Bullish activity continued at the KSE in a pre-budget rally in stocks across the board, with a record close on strong valuations.”

The Karachi Stock Exchange’s (KSE) benchmark 100-share index surged 1.96% or 277.40 points to end at the 14,419.92 point level.

“Rise in local power tariff, higher global commodities, and investors’ speculation ahead of revised CGT announcements in the finance bill due next month catalysed bullish sentiments at the KSE; amid renewed foreign interest in oil and banking stocks after quarter-end earnings announcements,” said Mehanti. Meanwhile, concerns for pending circular debt issues and rising political noise were relegated to the backburner, he noted.

“Active buying was witnessed in first tier stocks as total traded value soared to $93 million today. Fertiliser scrips witnessed active buying, as the Economic Coordination Committee is expected to procure 300,000 tons of urea from local manufacturers, which will help lift their second quarter earnings,” added Jaffar.

Trade volumes improved to a healthy 293.97 million shares compared with Wednesday’s tally of 246.39 million shares. The value of shares traded during the day was Rs8.48 billion.

Shares of 390 companies were traded on Thursday. At the end of the day 247 stocks closed higher, 90 declined while 53 remained unchanged.

Pakistan Telecommuni­cation Company was the volume leader with 26.42 million shares gaining Rs0.90 to finish at Rs14.42. It was followed by Lotte Pakistan with 22.76 million shares gaining Rs0.78 to close at Rs9.32 and DG Khan Cement with 15.90 million shares gaining Rs1.57 to close at Rs43.41.

Foreign institutional investors (FIIs) were net buyers of Rs451.68 million, according to data maintained by the National Clearing Company of Pakistan Limited.

“FIIs were rumoured buyers in energy and fertiliser scrips, while locals were seen buying cements and holding companies,” said Jaffar.

The KSE in April

The KSE-100 oscillated around 14,000 points through most of April, and rounded off just below, gaining 1.7% month-on-month (MoM), according to a KASB Securities research note. Average daily volumes, while 6% lower in terms of shares traded, were up 14%MoM in value terms.

The State Bank raised the minimum deposit rate on savings deposits by 1% to 6% in April. The month was also crowded with corporate results for the quarter ended March 2012; where energy prices, currency moves and taxation drove broad-based 26% year-on-year growth in profits. The impact on the market was, however, sporadic due to general lack of payouts and market sentiments being pegged to politics and regulatory issues.

The much-awaited Presidential Ordinance formalising the CGT relief package was promulgated towards the end of the month. While some of the finer modalities are yet to be clarified, the ordinance has attracted attention due to the quasi-amnesty nature of the scheme.

May kicks off with Pakistan-US relations still unresolved, which could have implications for pent up sovereign flows. In addition, opposition parties are going after the Prime Minister, after his conviction in the contempt of court case by the Supreme Court. Continued political uncertainty and dissent on the revised CGT regime could induce jitters in a market up almost 30% in May.

Published in The Express Tribune, May 4th, 2012.

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