Weekly review: Stock market all set to move up in the world

Investors anxiously await order regarding revised CGT regime as index closes right below 14,000-point barrier.

KARACHI:

The market witnessed a mixed week after the benchmark KSE-100 index surged past the 14,000-point barrier only to be brought down again by profit-taking and posting a modest gain of 114 points (0.8 percent) to close at the 13,875 points, during the week ended April 6.

After witnessing profit-taking in the opening session of the week, the index rose sharply mid-week as expectations grew regarding implementation of the revised Capital Gains Tax regime in the coming week, by the issuance of a presidential order or an SRO.

The index managed to cross the crucial 14,000-point barrier on Friday, before profit takers once again brought the index down restricting the achievement of the milestone. Overall, however, the index again closed the week in the black, following a 21 percent gain during the first quarter of 2012.

The index’s gains were helped by the strong performance of the cement sector and a lower inflation number for March. However, outflow of foreign investment and concerns about the credit rating of the banking sector were the major detriments to the bourse.

The cement sector was the star performer of the week, after the release of domestic sales figure for March, which rose 32% to its highest level ever and led to an across-the-board rally for the sector. Lucky Cement and DG Khan Cement, the country’s two largest cement manufacturers, led the way with gains of 12.4% and 7.8%, respectively.

Further hype was created for the sector as rumors regarding mergers and acquisitions circulated the market, with the possibility of Lucky, DG Khan and Attock Cement making potential acquisition of Dewan Cement.

Inflation numbers for March 2012 stood at 10.8% against 11% in February 2012, bringing an end to growth in the inflation numbers over the last couple of months. However, the lower inflation number is unlikely to have an effect on the monetary policy announcement due in the coming week, where status-quo at 12% is expected to be maintained.

The banking sector had mixed fortunes after rumours were debunked that an increase in corporate taxation on banks was on the cards. However, the sector came under pressure after news that Moody’s might downgrade the ratings of the big five banks of the country as their credit rating is better than the country’s sovereign debt rating.

Foreigners continued to be net sellers, offloading a net of $1.7 million worth of equity during the week. Volumes maintained their impressive level at 387 million shares traded per day on average, while average daily value also rose 20% to Rs7.7 billion per day. The market capitalisation of the KSE rose 1% to Rs3.57 trillion by the end of the week.

The market will anxiously await the Presidential Order/SRO regarding the revised CGT regime which can be expected to boost the market. However, with increasing profit-taking activity at the bourse, the possibility of a correction remains.

Monday, April 2

After gaining 4% last week, the stock market lost momentum as investors opted to book profits. The country’s largest explorer Oil and Gas Development Company alone contributed 58% to the entire 100-share index fall, according to Elixir Securities.

Tuesday, April 3

The stock market closed marginally higher after oscillating in both directions during the trading session.  Market moved in both directions as investors remained confused about the actual date of the approval for capital gain tax proposal.

Wednesday, April 4

The stock market surged to close near the 14,000-point level amid speculations that presidential order on changes in capital gains tax will be issued next week. Renewed institutional and foreign interest in blue chip stocks particularly the oil and banking sector lead the upward march.

Thursday, April 5

After the huge leap of 250 points a day earlier, investors made quick profits by selling at the inflated levels. Another round of strong performance was witnessed in the cement sector as domestic sales number stood at a record high in March.

Friday, April 6

The stock market hovered above the 14,000-point level but failed to sustain those levels as the benchmark index fell 145 points in the final 90 minutes. Cement stocks remained in the limelight on the back of reports that World Bank will provide $850 million for the fourth Tarbela extension project, reigniting hopes of increased cement demand over next four years, and expectations of healthy earnings, according to analysts.

Published in The Express Tribune, April 8^th, 2012.