Weekly Review: Stock market gains 0.4% in dismal participation

Average volumes drop 15% to 38 million shares.

KARACHI:

The week started off with extremely low volumes amid issues pertaining to capital gains tax, memo-gate controversy and gas supply to the manufacturing sector scaring off investors.

This resulted in average volumes dropping by 15% on a weekly basis to 38 million shares.

Local participation remained subdued after talks surfaced about a statement from finance ministry regarding Capital Gain Tax stating that there would be no change in tax collection modalities amid rumours of a reduction to increase participation.

Foreign fund managers remained mostly inactive due to Christmas and New Year holidays and remained net seller of meagre $0.4 million against previous week’s net outflow of $9.2 million.

The Securities and Exchange Commission of Pakistan announcement of individual financiers in the Margin Trading System (MTS) provided the much needed impetus for locals to join buying spree led by institutional investors.

The Karachi Stock Exchange’s (KSE) benchmark 100-share index gained 0.4 per cent or 47 points to end at 11,347.66 point level.

Adding to the misery of the fertiliser sector was poor sales numbers in November which further dampened investor sentiments.

Fertilizer sales in November were down 11% on a monthly basis due to persistent gas outages faced by manufacturers which has led to a drop in production levels. Urea and DAP, the two most widely used fertiliser, sales dropped 12% and 22%, respectively, on a monthly basis.

The industry was also dampened by the news that gas shortage will aggravate in the coming year.

Consequently, fertiliser stocks Fauji Fertilizer Company, Engro, Fauji Fertilizer Bin Qasim and Fatima Fertilizer underperformed the market by 3%, 6%, 10% and 1%, respectively.

The gas crisis in the country is worsening with the winter setting in. In order to rationalise gas usage, the government is considering proposals including month-long closure of CNG stations in Sindh and raising CNG prices by Rs13 per kilogramme. Moreover, the government finalised increase in gas tariff for different consumers from 14% to 207% from January 2012 which is likely to have a negative impact on the margins of the manufacturing sectors.

On the economic data front, large scale manufacturing grew by 2.1% in the first four months of fiscal 2012 mainly due to the low-base effect as floods last year had affected the industrial production. In October alone, however, the LSM contracted by 1.5%. Furthermore, foreign direct investment (FDI) fell by 27% to $419.8 million on a yearly basis.

NIB Bank stood as volume leader for two days in the week after a news report published in The Express Tribune that Tamasek Holdings intends to sell their majority stake in the bank to Industrial Commercial Bank of China. The bank’s stock price surged 16.1% to close at Rs1.73 during the week.

Published in The Express Tribune, January 1^st, 2012.