Weekly review: Mixed week at the KSE as market ends with a 0.4% decline
Index falls 1.8% in first three days, only to bounce back in the final two.
KARACHI:
A mixed week at the stock market ended with slight losses as the benchmark KSE-100 index fell 0.4 per cent (47 points) after witnessing a sharp decline in initial trading sessions of the week.
The week opened on a positive note as the State Bank of Pakistan announced on January 29 that it had decided to keep the discount rate unchanged for the next two months. Most analysts had expected another rate hike on the back of continued government borrowing and relentless climb in inflation.
Yet despite the unchanged rate, the first three trading sessions of the week saw the market decline by 1.78 per cent, primarily due to the ongoing crisis in Egypt. The crisis has resulted in oil prices climbing up to $100 per barrel, and is having spill-over effects in neighbouring Arab countries, which could have further negative impact on the world economy.
The government also announced at the start of the week that it would be keeping prices of petroleum products unchanged despite international oil prices climbing sharply. An earlier research report by JS Global had predicted that the economy will take a hit of $1.4 billion if the government does not adjust petroleum prices in tandem with crude prices in the international market. There was further bad news as reports began to circulate that the Ministry of Petroleum had decided to end the deemed duty on high speed diesel (HSD), which would affect oil refineries. The deemed duty on petroleum products was introduced to enable oil refineries to operate on higher margins so that they could upgrade their products. But according to a Judicial Commission report, this was never achieved.
As a result, it was recommended that ‘distorting concepts’ like deemed duty should be removed from the oil pricing mechanism. The petroleum ministry has since announced that the duty will be gradually phased out. This will result in a huge dent in the earnings of the country’s oil refineries.
Stocks of oil refineries nosedived on the announcement and the stock price of Pakistan Refinery fell 13.3 per cent, Attock Refinery fell 13.1 per cent and National Refinery fell 13 per cent during the week. Pakistan Refinery, expected to be taken over by Pakistan State Oil, was particularly hard hit as HSD forms more than 50 per cent of its product portfolio.
But the index rallied back and recouped its losses in the final trading sessions of the week on news that the margin trading system (MTS) was ready and could be implemented within a month’s time. Recent management changes in the Karachi Stock Exchange have led to acceleration of work on the product, which is a positive sign for investors, as it will inject liquidity into the market.
Volumes remained flat during the week and on average stood at 117 million shares per day. Foreigners also restricted their buying and were net buyers of $6.1 million worth of shares, the same as the previous week. The market capitalisation of the index dropped by 0.4 per cent and stood at Rs3.35 trillion at the end of the week.
Monday,January 31
The stock market see-sawed in the first trading session of the week as the index climbed 132 points in the first half before closing the day 103 points down.
Tuesday,February 1
Equities closed down in an exceptionally volatile session with reported local selling on news of rising fiscal deficit and uncertainty over refinery margins, according to dealers.
Wednesday,February 2
Stocks ended down as investors remained cautious following news of a possible removal of deemed duty collected by refineries.
Thursday,February 3
The local bourse managed to recover losses incurred over the past four days as investors turned bullish after the central bank’s quarterly report on the state of economy, say analysts.
Friday, February 4
The stock market rose on the last trading session of the week on renewed hopes for the introduction of a leverage product.
What to expect?
Stock-specific activity is expected to dominate proceedings in the coming week as sector heavyweights - PSO and MCB Bank - are to announce their results for the first half of the fiscal year. Volumes are expected to remain low for lack of a trigger.
Any news regarding the implementation of the MTS will be welcomed by investors and can provide the trigger, which the market currently needs.
Published in The Express Tribune, February 6th, 2011.
A mixed week at the stock market ended with slight losses as the benchmark KSE-100 index fell 0.4 per cent (47 points) after witnessing a sharp decline in initial trading sessions of the week.
The week opened on a positive note as the State Bank of Pakistan announced on January 29 that it had decided to keep the discount rate unchanged for the next two months. Most analysts had expected another rate hike on the back of continued government borrowing and relentless climb in inflation.
Yet despite the unchanged rate, the first three trading sessions of the week saw the market decline by 1.78 per cent, primarily due to the ongoing crisis in Egypt. The crisis has resulted in oil prices climbing up to $100 per barrel, and is having spill-over effects in neighbouring Arab countries, which could have further negative impact on the world economy.
The government also announced at the start of the week that it would be keeping prices of petroleum products unchanged despite international oil prices climbing sharply. An earlier research report by JS Global had predicted that the economy will take a hit of $1.4 billion if the government does not adjust petroleum prices in tandem with crude prices in the international market. There was further bad news as reports began to circulate that the Ministry of Petroleum had decided to end the deemed duty on high speed diesel (HSD), which would affect oil refineries. The deemed duty on petroleum products was introduced to enable oil refineries to operate on higher margins so that they could upgrade their products. But according to a Judicial Commission report, this was never achieved.
As a result, it was recommended that ‘distorting concepts’ like deemed duty should be removed from the oil pricing mechanism. The petroleum ministry has since announced that the duty will be gradually phased out. This will result in a huge dent in the earnings of the country’s oil refineries.
Stocks of oil refineries nosedived on the announcement and the stock price of Pakistan Refinery fell 13.3 per cent, Attock Refinery fell 13.1 per cent and National Refinery fell 13 per cent during the week. Pakistan Refinery, expected to be taken over by Pakistan State Oil, was particularly hard hit as HSD forms more than 50 per cent of its product portfolio.
But the index rallied back and recouped its losses in the final trading sessions of the week on news that the margin trading system (MTS) was ready and could be implemented within a month’s time. Recent management changes in the Karachi Stock Exchange have led to acceleration of work on the product, which is a positive sign for investors, as it will inject liquidity into the market.
Volumes remained flat during the week and on average stood at 117 million shares per day. Foreigners also restricted their buying and were net buyers of $6.1 million worth of shares, the same as the previous week. The market capitalisation of the index dropped by 0.4 per cent and stood at Rs3.35 trillion at the end of the week.
Monday,January 31
The stock market see-sawed in the first trading session of the week as the index climbed 132 points in the first half before closing the day 103 points down.
Tuesday,February 1
Equities closed down in an exceptionally volatile session with reported local selling on news of rising fiscal deficit and uncertainty over refinery margins, according to dealers.
Wednesday,February 2
Stocks ended down as investors remained cautious following news of a possible removal of deemed duty collected by refineries.
Thursday,February 3
The local bourse managed to recover losses incurred over the past four days as investors turned bullish after the central bank’s quarterly report on the state of economy, say analysts.
Friday, February 4
The stock market rose on the last trading session of the week on renewed hopes for the introduction of a leverage product.
What to expect?
Stock-specific activity is expected to dominate proceedings in the coming week as sector heavyweights - PSO and MCB Bank - are to announce their results for the first half of the fiscal year. Volumes are expected to remain low for lack of a trigger.
Any news regarding the implementation of the MTS will be welcomed by investors and can provide the trigger, which the market currently needs.
Published in The Express Tribune, February 6th, 2011.