Weekly review: Market continues upward march despite negativity

Volumes shoot up by 85% as KSE-100 climbs 2.1%.

KARACHI:

The stock market put up a resilient face in front of negative political and financial triggers, as the benchmark KSE-100 index managed to shoot past the 12,000-point barrier and close 2.1% or 249 points higher during the week ended February 10.

The market’s climb was surprising as negativity prevailed during the week with the International Monetary Fund (IMF) painting a bleak picture of the country’s financial health, the Supreme Court taking up the contempt of court against the Prime Minister and mixed earning announcements.

The market found a silver lining in the flow of foreign funds, which remained positive for a third successive week. Net foreign inflows stood at $5.97 million for the week, up from $2.2 million in the previous week.

This had another positive impact, as it resulted in increased investor participation. During the week, volumes shot up by 85 per cent and stood at 170 million shares compared with 91 million shares in the previous week.

The continued foreign inflows also helped to curb the negativity generated by the IMF’s report on Pakistan’s economy. The report stated that the State Bank of Pakistan was to blame for the country’s economic woes, by adopting an accommodative monetary policy and not being flexible with the exchange rate.

The report also stated that the government was being overly optimistic by targeting a fiscal deficit of 4.7 per cent for the year, and that the deficit may reach as high as 7 per cent by the end of the year. IMF expects GDP growth of 3.4 per cent and full year inflation to stand at 12 per cent. The last bit dashed hopes of investors hoping for a discount rate cut in the upcoming monetary policy.

During the week, the Supreme Court of Pakistan also resumed its contempt of court hearing against the Prime Minister and in a surprising decision, summoned the Prime Minister to appear before the court again on February 13.

To compound the negativity, the corporate earnings announced during the week were far from satisfactory as Pakistan State Oil announced lower-than-expected earnings of Rs26.7 per share, down six percent over the previous year. The country’s largest oil market company’s stock fell 4.5% in the last two days of the week after the announcement.

Furthermore, the Federal Board of Revenue raised objections about the Capital Gains Tax relief announced by the finance minister Abdul Hafeez Shaikh and called for a review of clauses relating to exemption from disclosing income, and the National Clearing Company of Pakistan’s role as an intermediary in the tax collection process.

Although volumes jumped up by 85 per cent, average daily value grew only by 13 percent and stood at Rs4.5 billion worth of equity traded per day on average. The market capitalisation of the KSE increased 2.2 per cent to Rs3.18 trillion.

What to expect?

The monetary policy announcement, decision on the contempt-of-court case and the direction of foreign flows will be key determinants of the market direction in the coming week. Relief to the energy sector, by retiring circular debt may also have a positive impact on the sector.

The stock market closed at a six-month high as investors took activity up a notch on rumours of foreign buying and ease in the circular debt in the next few days.

The stock market continued its upward march led by the oil sector amid rumours of foreign buying. Rumours turned out to be true as data released after the trading session revealed that foreign institutional investors were net buyers of Rs313 million worth of shares.

Trade volumes surged to a 13-month high as investors opted to book profits after a gain of around 3% in the last two trading sessions Energy stock Oil and Gas Development Company, Pakistan Oilfields and Pakistan State Oil were down by 1.2%, 0.3% and 1.3%, respectively.

The stock market witnessed continued profit taking in oil and fertiliser stocks led by Pakistan State Oil. The country’s largest oil marketing company PSO posted lower than expected profits and added fuel to the fire. The share price fell by Rs10 as disappointed investors booked profits in the stock.

The stock market remained range-bound as investors stayed away ahead of the monetary policy announcement scheduled today (Saturday). Prime Minister Yousaf Raza Gilani appearing before the Supreme Court on February 13 also kept investors from taking major positions in the market

Published in The Express Tribune, February 12^th, 2012.