Weekly review : Earnings season pushes KSE beyond 12,000 points

Market closed at 12,057, up by 0.86 per cent over the previous week.

KARACHI:

The stock market resumed where it left off in the previous week as the KSE-100 index managed to breach the 12,000-point barrier amidst earnings announcements of several major companies.

Despite a slow start, the index made steady gains throughout the week and managed to cross 12,000 points on Friday to close at 12,057, up by 0.86 per cent over the previous week.

Earnings announcements also triggered sector-specific activity and volumes picked up sharply by 66 per cent during the week. The relatively better average volumes of 104 million shares per day were a welcome sight after turnover had been on a constant decline in recent weeks.

Lotte Pakistan’s share was by far the most traded for the week after posting record first-quarter earnings and ended the week with an impressive gain of 6.7 per cent. The share closed at Rs16.72 on Friday.

Two heavyweights of the oil and gas sector also announced their results during the week and contributed to the market’s ascent. The Oil and Gas Development Company reported earnings per share (EPS) of Rs11.4 (up 15 per cent), while Pakistan Petroleum Limited’s EPS stood at Rs20.4 (up 45 per cent) for the quarter, triggering buying in both stocks.

The fertiliser sector also came into the limelight this week with earnings announcement of Engro Corporation, which reported EPS of Rs5.22 (up nine per cent), despite major curtailments in gas supply during the period. Engro’s share price rose 1.6 per cent during the week and Fauji Fertiliser Bin Qasim and Fauji Fertiliser Company followed with gains of 1.4 per cent and 0.7 per cent respectively.

The market gained despite a net outflow of $11.1 million in foreign funds. Although the market witnessed net buying from foreigners during four days of the week, there was a huge net outflow of $16.3 million on Tuesday, which could have affected the market.

Investment in the Margin Trading System stood at Rs351 million between Monday and Thursday, compared with Rs331 million in the previous week. Average financing rate stood at 16.5 per cent as compared with 16.2 per cent in the previous week.

While volumes jumped by 66 per cent, average daily value remained flat at Rs3.43 billion, reflecting the increased trading in second-tier and third-tier stocks such as Lotte Pakistan. The index’s market capitalisation also declined by 0.9 per cent and stood at Rs3.2 trillion.

What to expect?

As the earnings season draws to a close, investors are shifting their focus to the upcoming Budget 2011-12. The budget is expected to bring widespread changes to tackle issues of taxation, inflation and GDP growth.

The government has so far failed to implement many of the International Monetary Fund’s requirements and may utilise the budget as an opportunity to implement them amongst broader changes. These changes may well determine the future direction of the market.

Monday, April 25

A negative close was witnessed at the Karachi bourse in the first trading session of the week on Monday amid limited institutional and foreign interest. Equities remained sluggish with significantly lower volumes, possibly due to lack of foreign activity on account of Easter holidays.

Tuesday, April 26

The bourse recorded yet another range-bound session with better-than-expected corporate results providing late impetus to the market. Result-based activity was witnessed as investors opted to deal in selected stocks.

Wednesday, April 27

Results-based buying on the back of better-than-expected earnings helped the stock market post a positive close. Buying interest was sector-specific but oil stocks put together some of the best gains.

Thursday, April 28

After two days of result-related excitement, equities lost steam and volumes remained on the lower side, despite some key result announcements. Foreign investors were said to be buyers in energy scrips, while locals were buyers in refineries and third-tier banks

Friday, April 29

Stocks rallied for rich gains in the last trading session of the week as the bourse crossed the 12,000-point barrier. Although support was broad-based, the oil sector proved pivotal in the overall performance.



Published in The Express Tribune, May 1^st, 2011.