Market index had risen by 21% since the start of May.
The index recorded an unprecedented rally in the last one and a half months and climbed 3,910 points (21%) since the start of May and hit levels never witnessed before on its way to shattering the 22,000-point barrier.
At such high levels, a correction was bound to happen and it finally came this week with the index closing in the red in all but one trading session of the week.
Analysts at KASB Securities termed the correction “healthy” following the market’s impressive performance in recent months.
Investors had also adopted a cautious approach during the week in anticipation of the monetary policy announcement. Contrary to the consensus among analysts that the central bank would maintain the status quo, the State Bank of Pakistan cut the discount rate by 50 basis points in the policy announcement, which was made after the close of market on Friday.
The level of foreign flows was also a matter of concern to investors as net inflow was recorded at $9.2 million for the week. The number is expected to decline in coming weeks due to slowdown in global markets and the KSE becoming less attractive at its current high levels.
There were positives for the market from macroeconomic data. The current account deficit for 11 months of fiscal year 2012-13 stood at $1.95 billion compared to $3.92 billion in the same period last year. The improvement was largely the result of payments received from the US under the Coalition Support Fund amounting to $1.81 billion.
Textile exports for 11 months rose 5.3% to $11.9 billion on the back of higher yarn exports to China and improved sales to the European Union. News also emerged that the country would receive a $5 billion loan in early September from the International Monetary Fund to help ease balance of payments pressure.
Sector-specific news was few and far between with majority of stocks taking a battering. The discovery of gas and oil by Pakistan Petroleum Limited in Gambat field generated some interest but investor participation remained low.
Average trading volumes dipped a further 13.3% to 321 million shares per day, following a 28% decline in the previous week. Average daily value also dropped 8% to stand at Rs9.34 billion. The market capitalisation fell 3.4% to Rs5.26 trillion by the end of the week.
Following the much-needed correction, the market can be expected to turn green in the coming week due to the reduction in the discount rate. Investors should, however, remain cautious as the market stands at high levels.
Winners
Pakistan Tobacco
Pakistan Tobacco Company Limited manufactures and sells cigarettes.
Pakistan Cables
Pakistan Cables Limited manufactures and distributes copper rods, wires, cables and conductors, aluminium profiles and anodised fabrications.
Clariant Pakistan
Clariant Pakistan Limited manufactures textile and leather chemicals, dyes, pigment preparations, and master batches. The company also acts as indenting agents for the parent, Clariant AG and affiliates, in the chemical, dyes, paper, emulsions, life sciences, and other sectors.
Losers
Pace Pakistan
Pace Pakistan develops real estate in both the residential and commercial sectors. The company develops and constructs shopping malls, supermarkets, and apartments.
TRG Pakistan
TRG Pakistan operates as an information technology company. The company provides business support and software services to companies. It manages call centres and offices in Pakistan and elsewhere throughout the world.
IGI Insurance
International General Insurance Company of Pakistan Limited provides property and casualty insurance products and services. The company’s products include fire, marine, and motor insurance.
Published in The Express Tribune, June 23rd, 2013.
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