Market watch: Bourse surges to four-year high on the back of US agreement

KSE’s benchmark 100-share index gains 140 points

KARACHI: The stock market rose to a 50-month high on Wednesday on the back of new agreement with the US and lower than expected inflation.

The Karachi Stock Exchange’s (KSE) benchmark 100-share index gained 0.96 per cent or 139.86 points to end at the 14,716.86 points level.

A new agreement on Nato supplies was signed between Pakistan and the US on Tuesday, replacing the existing Memorandum of Understanding in place since 2004. The agreement includes the release of long overdue finances from the Coalition Support Fund, which is reimbursement for expenses accrued in the war against terrorism.

Furthermore, inflation declining to stand at 9.6% for July aided the market’s bullish sentiments, said JS Global Capital analyst Mujtaba Barakzai.

Trade volumes gained to 104 million shares compared with Tuesday’s tally of 77 million shares.

Going forward, the market awaits the upcoming monetary policy where rumors suggest there could be a cut of 50-100bps. Pakistan Oilfields, Pakistan Petroleum and Oil & Gas Development Company went up to 0.6%, 1.2% and 1.8% on the back of upward trend in international oil prices.

Foreign institutional investors were net buyers of Rs100 million worth of shares, according to data maintained by the National Clearing Company of Pakistan Limited.

Cement stocks rallied as investors anticipate that decline in interest rates in the upcoming monetary policy will help cement companies high debt, according to Topline Securities Equity Dealer Samar Iqbal.

Shares of 295 companies were traded on Wednesday. At the end of the day 155 stocks closed higher, 93 declined while 47 remained unchanged. The value of shares traded during the day was Rs3.4 billion.

Maple Leaf Cement was the volume leader with 17.9 million shares gaining Rs0.97 to finish at Rs7.3. It was followed by DG Khan Cement with 12.9 million shares firming Rs1.2 to close at Rs47.4 and Fauji Cement with 9.1million shares increasing Rs0.1 to close at Rs6.2.

Top performing market in Asia-Pacific region

The Karachi stock market generated returns of 6% in July on a monthly basis and outperformed all fellow stock markets in Asia-Pacific region.

Philippines and Indonesia followed by posting returns of 5.1% and 4.8% respectively, while the Asia Pacific Markets’ average returns clocked in at 1.4% on a monthly basis, according to an InvestCap research note.

During the first half of the month, the market remained in upward trajectory and touched the highest level of 14,568 on the back of better relations with the US following resumption of NATO supplies. However, in the later part of the month the market remained stagnant and index showed range bound behavior with low activities highlighting investors’ mood during the month of Ramadan, adds the note.

Market average value of transaction, however, was lower at $43 million during July, down 80% from decade’s average at $119 million.

On the other hand, the total FIPI of the Asia Pacific Markets stood at USD1.8bn, in which India has the heaviest share, attracting foreign inflow of 1.9bn during Jul-12.

Based on sector-wise performance, the cement sector outperformed the KSE-100 index returns and posted return of 16% based on market cap followed by financial services and software & computer service sector, which posted returns of 13% and 12% respectively.

Published in The Express Tribune, August 2^nd, 2012.