Weekly Review: Index rounds off first week of FY14 with significant gains

IMF deal, premier’s visit to China and lower inflation figures fuel optimism at bourse.

KARACHI: The first week of the new fiscal year was marked by an extended bull run, which followed two weeks of bearish activity at the Karachi bourse. The government’s meetings with the International Monetary Fund (IMF) remained the centre of investors’ focus, as the new managers of the country’s economy successfully negotiated the terms for a new bailout package.

The IMF’s $5.3 billion loan will be issued under a three-year Extended Fund Facility and will carry a floating interest rate of 3%. The agreement is subject to Pakistan satisfying the IMF on three fronts: power sector reforms, elimination of non-targeted subsidies, and enhancing tax collection and broadening the tax base.

Inflation figures were also released during the week for the preceding month, which clocked in at 5.9% year-on-year as measured by the Consumer Price Index (CPI). The figure was lower than expected and sparked bullish sentiment at the bourse, which closed up 5.6% week-on-week (WoW) with a gain of 1,173 points. Volumes traded were higher by 27% WoW, averaging 263 million shares, while foreign portfolio investments clocked in at $7.15 million.

The settlement of outstanding independent power producers’ (IPPs’) dues worth Rs326 billion was also in the headlines, encouraging investors to keep a positive outlook for the economy. The government has issued bonds worth Rs128 billion, in addition to making a cash payment worth Rs161 billion to IPPs, and a Rs33 billion cash payment to Pakistan State Oil.

The Economic Coordination Committee also decided to divert gas from the Guddu power plant to the fertiliser sector. “This is likely to add an additional 50,000 tons of fertiliser to domestic production,” said an note authored by Naveed Tehsin, an analyst at JS Global Capital. “It is for this reason Engro outperformed the market by 9.7% WoW,” he added.



In other news, the prime minister is on a visit to Beijing, carrying a wish list of major development projects. Some agreements have already been made, most notably one on an $18 billion economic corridor that will connect Kashgar in China to Gawadar Port.

Furthermore, Finance Minister Ishaq Dar has directed that all outstanding issues with Etisalat in the privatisation of the Pakistan Telecommunication Company be resolved within 10 days; following which the UAE-based telecom company is expected to release an outstanding amount of $800 million.

Outlook

An analyst report released by KASB Securities says that: “Excitement on improved cash flow position and chances of bumper payouts for IPPs will keep interest alive in the broader energy chain. Furthermore the government’s commitment to clear up the remaining of inter-corporate debt before end of July should also improve sentiments.”

Winners

KESC



The Karachi Electric Supply Company is a privately-controlled power producer, which transmits and distributes electricity.

Sui Northern Gas Pipelines



Sui Northern Gas Pipelines purchases, purifies, transmits, distributes, and supplies natural gas, in addition to marketing Liquefied Petroleum Gas.

Pakistan Tobacco Company



Pakistan Tobacco Company manufactures and sells cigarettes.

Losers

Shifa International Hospitals



Shifa International Hospitals Limited establishes and runs medical centres and hospitals in Pakistan.

EFU General Insurance



EFU General Insurance Limited is an insurance provider. The group supplies a number of lines of coverage, including fire, marine, aviation, transport, motor and miscellaneous.

Standard Chartered Bank



Standard Chartered Bank Pakistan is an international bank that provides consumer and wholesale banking.

Published in The Express Tribune, July 7^th, 2013.

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