Weekly review: KSE-100 climbs 3% amidst renewed interest

Stock market climbs up during the week which ended April 1.

KARACHI:

The stock market finally managed to break its bearish trend as the KSE-100 index climbed 3.05 per cent (333 points) during the week ended April 1, on the back of renewed investor interest.

Activity in the banking, cement and fertiliser sectors paved the way for the market’s resurgence, while continued foreign inflows and positive macroeconomic data also contributed to the market’s gains.

The week started off slowly, but on a positive note, after the State Bank of Pakistan announced that the discount rate was being maintained at 14 per cent due to reduced inflationary pressures and limited government borrowing since the last review two months ago.

The following day, the market gained pace, led by interest in the cement sector. Cement prices have increased on average by Rs35 per bag in the last two weeks, which has resulted in a comeback for the sector.

Prime Minister Syed Yousaf Raza Gilani also visited India to watch the Cricket World Cup semi-final between Pakistan and India, which led to rumours that he would lobby for lifting of the cement import ban in India. These positive developments led to the cement sector climbing 4.2 per cent during the week.

Unsurprisingly, Wednesday was the slowest day of the week, with volumes standing at a paltry 52 million shares as a result of the semi-final, which had gripped the attention of the country. The index still managed to make decent gains on that day.

Towards the end of the week, activity was witnessed in the banking and fertiliser sectors. Banks were the biggest gainers during the week on news of increased foreign buying and institutional activity. Overall, the banking sector climbed by five per cent, led by Habib Bank Limited’s 11 per cent gain.

The fertiliser sector was also in the limelight on reports of an increase in sales in February, which would translate into a strong first quarter for the sector. The sector climbed 3.6 per cent during the week, with Fauji Fertiliser leading the way with a 7.6 per cent gain.

Foreign buying remained positive, standing at $2.97 million, after net inflows of $4.8 million in the previous week. Rumours of foreign selling have been quelled by the fact that there have been net inflows for the previous three weeks.

The Margin Trading System (MTS) also continued to make steady headway, although it is yet to make a mark in improving overall volumes. MTS investment stood at Rs228 million between Monday and Thursday, compared with Rs48 million in the previous week. Average financing rate also improved to 17.48 per cent from 18.79 per cent in the previous week.

Average daily volumes jumped by 25 per cent over the previous week, but stood at a low level of 78 million shares per day. Average daily value increased by 19.9 per cent, reflecting that the jump in volumes was mostly in lower-tier stocks. The index’s market capitalisation also rose by 2.8 per cent, standing at Rs3.17 trillion.

What to expect?

The KSE-100 index has had a torrid start to the year. For the first time in 10 years, the index has stood in the red for the first quarter of the year, having shed two per cent. This has been primarily due to political tensions, both local and foreign, as well as fluctuating macro data.

Yet, this has been the fate of a majority of the markets in the region and should not be looked at very negatively. The coming weeks can be expected to be range bound, as the next round of triggers is likely to come from January-March result announcements, which are expected to start towards the end of April.

Monday, March 28

The stock market closed marginally higher in a dull trading session at the start of the week. The announcement of an unchanged monetary policy by the State Bank of Pakistan on Saturday failed to provide any impetus to the market as it was in line with expectations.

Tuesday, March 29

Bulls took over the stock market as local and foreign investors resumed buying of stocks. Buying was led by the cement sector after the All Pakistan Cement Manufacturers Association requested the prime minister to present its case in India, which has imposed a ban on import of cement from Pakistan.

Wednesday, March 30

The stock market gained in extremely thin trade as investors seemed more interested in the Pakistan-India cricket match, than the shortened trading day. Sentiment remained positive on hopes of a breakthrough in diplomatic and trade and industrial relations with Delhi, after a Pakistani delegation left for India to watch the match.

Thursday, March 31

Investor mood remained sombre but a positive close was witnessed on the back of institutional and foreign interest in blue chips. Early trading in the oil sector helped the market gain 78 points; however, a depressed mood after the loss of Wednesday’s cricket semi-final against India spilled over to the next day, leading to thin trading.

Friday, April 1

The stock market climbed in a lacklustre session as many investors preferred to stay on the sidelines. Focus continued to remain on the fertiliser and cement sectors on the back of positive earning expectations and higher product prices, respectively.

Published in The Express Tribune, April 03^rd, 2011.