Weekly Review: KSE-100 recovers but fails to cross 18,000 points

Easing of political tensions and foreign inflows contribute to market growth.

KARACHI:

The stock market managed to reverse the bearish onslaught and staged a recovery as political tensions eased, with the benchmark KSE-100 index climbing 299 points (1.7%) but fell short of crossing the 18,000-point barrier during the week ended March 22.

After two consecutive weeks of declines, the market looked all set for a further drop as no consensus was reached on the caretaker prime minister after the dissolution of assemblies last week. As a result, the market opened on a negative note and declined to 17,492 points (down 1%) on Monday.

However, the KSE-100 closed positive in the remaining sessions of the week, with the index signing off at 17,963 points on Friday, just short of the 18,000-point barrier.

This recovery was a result of easing of political tensions and increased foreign investment in the stock market. After failing to agree on the caretaker prime minister from nominated candidates, the government and opposition parties agreed that the final decision on the caretaker premier would be made by consensus and formed a committee to achieve the goal.

Investor fears also eased as the United States did not make any announcement about possible sanctions against Pakistan for going ahead with the Iran-Pakistan gas pipeline project. The inauguration of the project last week had led to panic selling in the bourse.

Foreigners also actively participated in the market and were net buyers of $9.3 million worth of equity, up $4 million on the previous week. Foreigners have been actively purchasing equities at the bourse and this week’s net inflow was by far the largest in the month.

During the week, the government also filed an application with the European Union for the grant of GSP Plus status to Pakistan, sparking a rally in the textile sector. Nishat Chunian Limited and Nishat Mills were the main beneficiaries and climbed 12.3% and 9.8% respectively.

On the macro front, the news was a bit gloomy as foreign exchange reserves continued their downward slide and fell $129 million to $12.44 billion as per latest figures. With another IMF payment of $146 million due on March 28 and $108 million on April 1, the country’s forex reserves can be expected to plummet.

Treasury bill auction held during the week also brought bad news as cut-off yields increased by five basis points. The trend of rising cut-off yields suggests that the banks believe that monetary tightening is likely and that the central bank may increase the discount rate in upcoming months.

Average daily volumes recovered slightly and rose 7.1% to 186 million shares. However, average daily values declined 1.7% to Rs5.97 billion. The market capitalisation of the KSE rose 0.4% to Rs4.38 trillion by the end of the week.

Winners of the week

Nishat (Chunian)



Nishat (Chunian) manufactures and sells yarn and fabric. The company operates spinning, weaving, dyeing, and finishing units.

Nishat Mills



Nishat Mills is a textile manufacturing company. The company spins, combs, weaves, bleaches, dyes, prints, and buys and sells yarn, linen, other cloth, and goods. The company also owns a power plant that generates, accumulates, distributes, and supplies electricity.

Pak Services



Pakistan Services is the holding company for Pearl Continental Hotels (Private) Limited, which constructs, operates and manages hotels. The group also owns a number of smaller companies that provide rent-a-car, travel arrangements and tour packages.

Losers of the week

IGI Insurance



International General Insurance Company of Pakistan provides property and casualty insurance products and services. The company’s products include fire, marine, and motor insurance.

Bankislami Pakistan



Bank Islami Pakistan attracts deposits and offers Islamic banking services. The bank offers mortgage and automobile loans, lease financing, wealth management services, and letters of credit and guarantee.

Colgate Palmolive



Colgate-Palmolive Pakistan manufactures and sells detergents, personal hygiene, and a variety of other products.

Published in The Express Tribune, March 24^th, 2013.

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