Weekly review: KSE index closes flat amidst plummeting volumes

Market fails to sustain momentum due to lack of triggers.


Bilal Umar June 18, 2011

KARACHI:


Lack of triggers resulted in a sharp decline in activity at the country’s bourses as the benchmark KSE-100 index closed flat during the week ended June 17. The index dropped slightly by 0.1 per cent (16 points), while volumes plummeted 53 per cent.


The market had made steady gains in the past few weeks on the back of pre-budget excitement and had continued to make gains, despite the disappointing budget, due to positive news flow from the energy and power sector.

However, news flow dried out during the current week, resulting in low investor participation and range-bound movement in the KSE-100 index. The only noticeable reports were related to Pakistan Petroleum Limited (PPL) and macro data for 11 months of financial year 2010-11.

PPL announced that it would be holding an emergency board meeting on June 21. It is widely expected that the company will announce an early cash payout of around Rs8-10 in this board meeting, which created excitement in the scrip.

PPL has conducted a similar exercise twice in recent times (December 2008 and March 2009). The share price rose 1.8 per cent to Rs216.13 by the end of the week.

Macro data for 11 months of fiscal year 2011 was also released during the week. The numbers had a mixed impact on the market as remittances grew 25 per cent and stood at $10.1 billion for the period, while trade deficit rose one per cent to $14.1 billion over the previous year. Foreign direct investment was down 30 per cent to $1.4 billion in 2011.

News also circulated regarding an increase in Oil Marketing Companies’ (OMCs) margins by 32-37 per cent, benefitting the two largest OMCs, Pakistan State Oil and Shell Pakistan Limited. PSO rose by 1.8 per cent to Rs283 per share, while Shell rose by 0.9 per cent to Rs228 per share, on the news.

Independent Power Producers (IPPs) were also in the news as Nishat Group announced the IPO of its stake in Pakgen Power Limited. There was also news about operations shutting down in Hub Power Company’s newly set-up Narowal plant, while four IPPs invoked sovereign guarantee of the Government of Pakistan for non-payment of their dues by National Transmission and Dispatch Company (NTDC).

Average volumes dropped sharply by 53 per cent and stood at 53 million shares per day, reflecting the decline in market activity. Similarly, average daily value also plummeted 60 per cent and stood at Rs1.9 billion per day. The KSE’s market capitalisation declined 0.4 per cent to Rs3.26 trillion during the week.

What to expect?

The lack of triggers can be expected to continue in the coming week and as a result, the market activity is likely to remain low. Sector-specific news or the direction of foreign flows will be the likely determinants of the market’s direction during this period.

PPL’s earnings announcement will be particularly observed as a high payout by the company can trigger a rally in the energy and power sector, which will undoubtedly take the KSE-100 index along with it.

Monday, June 13

The stock market fell on the first trading session of the week amid lack of participation and any positive triggers. The Karachi Stock Exchange’s (KSE) benchmark 100-share index fell 0.2 per cent or 24.4 points to end at 12,353.36 points.

Tuesday, June 14

The bourse stayed mostly in neutral territory in a dull session as investors remained on the sidelines in the absence of any trigger. The Karachi Stock Exchange’s (KSE) benchmark 100-share index fell 0.12 per cent or 15.4 points to end at 12,337.9 point level.

Wednesday, June 15

The stock market continued its dull phase as volumes remained depleted while a major chunk of activity was confined to second tier stocks. The Karachi Stock Exchange’s (KSE) benchmark 100-share index fell 0.17 per cent or 20.79 points to end at 12,317.15 point level.

Thursday, June 16

Pakistan Petroleum came to the rescue and broke the stock market’s three-day downward trend following news of the company’s board calling an unscheduled meeting. The Karachi Stock Exchange’s (KSE) benchmark 100-share index rose 0.42 per cent or 51.97 points to end at 12,369.12 point level.

Friday, June 17

Local bourse eased on the last trading session of the week, in line with its global peers, amid low activity. The Karachi Stock Exchange’s (KSE) benchmark 100-share index fell just 0.06 per cent or 7.8 points to end at 12,361.31 point level.



Published in The Express Tribune, June 19th, 2011.

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