Weekly review: KSE-100 makes solid gains ahead of earnings season

Volumes pick up as investors flock to buy payout-heavy stocks.


Bilal Umar July 23, 2011

KARACHI:


Activity returned to the market ahead of the corporate earnings season as the benchmark KSE-100 index climbed 1.1% (130 points) to close at 12,477 points during the week ended July 22.


With several companies from the banking and fertiliser sectors set to announce their results in the coming week, investors flocked to the market and as a result, volumes picked up 149% over the previous week.

The market’s gains were even more significant as there was a net outflow of $22.3 million of foreign funds, which dragged the market down. Activity was broad-based due to positive news from various sectors.

The recent increase in fertiliser prices, along with upcoming result of Fauji Fertiliser Bin Qasim (FFBL), attracted a lot of interest in the sector, and FFBL’s scrip was the volume leader for the week. Its share price climbed 1.1% to close at Rs47.56 per share.

The banking sector also recorded substantial gains, with Faysal Bank Limited announcing its half-year result, showing impressive growth which resulted in its share climbing 9.2% during the week. News regarding relaxation in forced sale value rates of collateral assets also improved prospects for the sector.

Political tensions also took a backseat during the week with a truce between the Pakistan Peoples Party and the Muttahida Qaumi Movement in the Sindh Government which had affected the law and order situation in Karachi.

Furthermore, the US Congress voted 39-5 against cutting off aid to Pakistan. The margin was significant as it was expected that the proposal would pass through Congress, but not the US Senate. However, the bill was quashed in its inception stage, indicating that aid to Pakistan will continue to come in.

Oil prices in the international market also climbed to around $111 per barrel which resulted in activity in the energy and power sector. The Oil and Gas Development Company climbed 3.4% to Rs155.83 per share, while Pakistan Petroleum rose 2.7% to Rs215.09 per share.

Average volumes jumped 149% and stood at 85 million shares per day. Similarly, the average traded value also climbed 142% and stood at Rs4 billion per day. The index’s market capitalisation rose 1.2% and stood at Rs3.29 trillion by the end of the week.

What to expect?

With the corporate earnings season under way, stock-specific activity can be expected to pick up as investors flock to invest in high dividend-yielding stocks. Furthermore, unexpected results may trigger sector-wide activity.

The State Bank of Pakistan is also set to announce the monetary policy for the next two months on July 30. Market consensus is that status quo will be maintained and thus will not affect market proceedings. However, any news regarding a meeting between the International Monetary Fund and the government should be watched closely for developments on the resumption of standby loan arrangement.

Monday, July 18

The stock market fell on the first trading session of the week while the fertiliser sector continued to dominate activity at the bourse.

Tuesday, July 19

The stock market rose ahead of the corporate results season. The stock market performed better after Sindh Governor Ishratul Ebad rejoined his office .

Wednesday, July 20

The stock market flirted with the 12,500 point level but investors booking profits in the final hours of the trading session pulled the bourse down. The activity for the second straight day remained broad based as local institutions became active ahead of the year end result season.

Thursday, July 21

The stock market continued its upward trend led by banking stocks as late buying in MCB Bank and National Bank of Pakistan supported the index gain.

Friday, July 22

The stock market remained stable despite the Federal Board of Revenue’s move to amend rules for Capital Gains Tax to lift activity. The market experienced heightened profit-taking later in the day due to poor law and order situation in the city.



Published in The Express Tribune, July 24th, 2011.

COMMENTS (1)

Ammar | 10 years ago | Reply

It is the best time to gain confidence of the investors who were reluctant to invest in the KSE. I'm too shaky to invest further but had put some eggs in the nest of KSE

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