Weekly Review: Market ends week sustained by corporate results
The week starting October 15, 2012, marked the first week from which the Karachi Stock Index (KSE’s) benchmark 100-share index will be computed using a free-float based mechanism, instead of the now outmoded market cap weight based computation method.
The market was choppy throughout the week as investors adjusted to the change and there were signs that the market may be entering consolidation mode; nonetheless, investors rounded off the week with a strong rally on Friday to help the bourse close up 0.6% on a week-on-week (WoW) basis.
Volumes remained flattish, improving only 3% WoW to 120 million shares per day, while the value of shares traded dropped by almost 15%. Foreigners were also less active, with net inflows plunging 32% WoW to a more modest $6.4 million, according to a research note released by JS Global.
On the macroeconomic front, the current account deficit slipped once again into the red in September, but a lump-sum Coalition Support Fund payment and higher remittances sustained the current account and kept it in surplus of $432 million for the first quarter of the current fiscal year. An ease in inflationary pressure and the commencement of the corporate results season also spurred investor interest in the market.
Following the cut in the discount rate offered by the State Bank of Pakistan, cut-off yields on Treasury Bills were also reduced further during the week by nine-11 basis points. The State Bank of Pakistan also revealed on Tuesday that foreign direct investment in the country fell by 67% during the first quarter of the current fiscal year, compared to the same period of the preceding year.
Pre-result buying in cement and textile companies due to a healthy earnings outlook kept the sector in the limelight. Almost 24% of volumetric activity was concentrated in the construction and materials sector, in which cement companies were the centre of investors’ attention.
Among key individual stock performances, Lucky Cement and DG Khan Cement both outperformed the market by 1.7% and 3.2% respectively on a strong earnings outlook. On the other hand, losses incurred due to an employee separation scheme and parliamentarians’ concerns regarding an increase in tariff led to Pakistan Telecommunication Company underperforming the market by 2.8%.
Outlook for the future
The next week will be shortened due to the Eidul Azha holidays which commence from Friday. Analysts believe the market will remain range-bound and react to results announcements. Once the results season is over, however, the market faces a potential lack of triggers and activity could cool down, says a KASB Direct research note.
Furthermore, the National Clearing Company of Pakistan Limited (NCCPL) has imposed Rs3 per Rs100,000 as service charges on capital gain tax (CGT) calculation on share trading. The move is likely to dent investor participation in the market, say analyts.
Winners of the week
National Foods
National Foods Limited operates as a food company in Pakistan and internationally. The company engages in the manufacture and sale of spices, pickles, ketchups, jams, jellies, sauces, cooking pastes, rice, salt, juices, and ready-to-eat meals.
Bata (Pakistan)
Bata Pakistan Limited manufactures and distributes footwear. It is engaged in the sale of footwear of all kinds along with sale of accessories and hosiery items. Its major brands include Power, Weinbrenner, Marie Claire, Comfit and Bubblegummers.
Azgard Nine
Azgard Nine Limited manufactures yarn and denim garments with a strong customer base in US, Canada and Europe. The company operates through its subsidiaries including Pak-American Fertilisers Limited, Hazara Phosphate Fertilisers and Montebello SRL.
Losers of the week
Thal Limited
Thal Limited manufactures jute goods, engineering goods, paper sack and laminate sheets. The jute operations is located at Muzaffargarh, engineering operations at Karachi, paper sack operations at Hub and Gadoon and laminate operations at Hub.
TPL Trakker Limited
TPL Trakker Limited is a vehicle tracking and fleet management service provider for markets in the Middle East & South Asian (MESA) region. The company’s business is to supply GPS, GSM & Satellite Mobile Asset Tracking, Management and Information Solutions.
Nishat (Chunian) Limited
Nishat (Chunian) Limited is a manufacturing and finishing operation consisting of five spinning units, one weaving unit, one dyeing and finishing unit and one stitching unit. NCL operates with 150,000 spindles with a monthly production capacity of 7.5 million lbs of yarn and 4.0 million yards of greige fabric.
Published in The Express Tribune, October 21st, 2012.
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