Weekly review: Stock market climbs for eighth successive week

Volumes shoot up by 67% as KSE-100 rises 2%.


Bilal Umar March 11, 2012

KARACHI:


The market continued its relentless upward drive, as the benchmark KSE-100 index rose for an eighth consecutive week, by posting a 2% or 264 points gain to close at the 13,353-point level during the week ended March 9.


The index last saw a negative week in mid-January and has since rallied upwards and climbed almost 18% since the start of the year. Investor sentiments were ignited by the finance minister’s announcement in January regarding relaxations in the Capital Gains Tax regime, and the excitement is yet to fade away.

Despite profit-taking during the week, the index managed to post a 2% gain. The highlight of the week was the impressive volumes turnover at the bourse. Volumes averaged 355 million shares per day for the week, up 67% over the previous week. The week culminated with 553 million shares traded on Friday, a level last witnessed six years ago in March 2006.

The market’s rally was broad-based, with heightened activity in all sectors, especially banking and cements. NIB Bank was the star performer for the banking sector, rising by a whopping 58.3% during the week. Bank Alfalah also rose 11% while United Bank and National Bank of Pakistan both rose by 6%.

The cement sector witnessed heavy activity during the week, after the revelation of an up-tick in cement sales at improved price margins. Cement prices have gone up over the last six months, while the cost of production has come down in the same period.

Maple Leaf Cement was the extra-ordinary performer for the sector, rising by 57% during the week. It was followed by Lafarge Pakistan Cement, which rose 21%, while Fauji Cement rose 10%.

The fertiliser sector also witnessed decent activity, as gas supply to plants on the Sui Northern Gas Pipelines network – Engro’s Enven, Pak Arab, Dawood Hercules and Agritech – was restored after a shutdown of almost three months.

The only big results announcement during the week was from the National Bank of Pakistan, which posted flat earnings of Rs10.67 per share. However, the company announced a Rs7.5 cash dividend along with a 10% stock dividend did surprise investors and increase activity in the stock.

Foreigners were net buyers of $7.6 million worth of equity during the week. While volumes were up 67%, average daily value increased only by 15% and stood at Rs7.2 billion traded per day, reflecting that most of the trading was in second and third tier stocks. The market capitalisation of the KSE rose by 2.4% to Rs3.47 trillion by the end of the week.

What to expect?

With no major earnings announcement remaining, the market will shift its focus towards the conclusion of the CGT reforms, via an issuance of an ordinance. Furthermore, speculation regarding the budget for fiscal 2013 will also kick in, with rumours already abound that the corporate taxation rate may be slashed in the budget.

Investors should again trade cautiously in the market at the current high levels, as a major correction can take place at any stage in the coming weeks.

Monday, March 5

Trade volumes – an indicator of the activity level – reached a two-year high of 295 million shares compared with Friday’s tally of 253 million shares.

Tuesday, March 6

The stock market continued its upward rally with the banking sector leading the way.

A mixed trading session was witnessed as major oil, fertiliser and cement shares underwent mild pruning while the banking sector’s result announcement supported the rally, said JS Global Capital analyst Jawad Khan.

Wednesday, March 7

After a five-day upward trend that helped the bourse climb to levels not seen since June 2008, the stock market witnessed profit-taking across the board. Decline in regional markets and commodity prices also affected the local bourse, Samar Iqbal Equity Dealer Topline Securities.

Thursday, March 8

The stock market staged a recovery with volumes touching a two-year high, after profit-taking saw the index dip on Wednesday. The cement sector was the major gainer of the day, as investors bought stocks on news of dispatch numbers that indicated increased domestic sales by 7 per cent year-on-year in the first eight months of the current fiscal year.

Friday, March 9

The stock market ended the week in style as trading activity surged to a phenomenal six-year high with second and third tier stocks dominating the session. Trade volumes surged a massive 74% to 552.8 million shares compared with Thursday’s two-year high of 318.6 million shares.

Published in The Express Tribune, March 11th, 2012.

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