Weekly review: Market stays in consolidation phase ahead of long weekend

Results announcement, sector-specific news, lesser investor interest before Eid keep market volatile.

KARACHI:

The market continued to remain in the consolidation phase as the Karachi Stock Exchange closed flat. Quarterly results season and corporate-specific news dominated investor sentiments. Moreover, trading activity remained thin during the week ending October 25, ahead of long weekend for Eidul Azha.

The local bourse managed to close the week at 15,813 points, up a nominal 0.1% from the previous week. However, average trading volumes climbed 31% to a paltry level of 133 million shares, mainly on the back of financial results. Foreigners showed interest in the market, with net buying worth $5.5 million during the week.

Results for the first quarter of the fiscal year 2012-13 was announced by major trading stocks such as the index-heavyweight Oil and Gas Development Company, Lucky  Cement, DG Khan Cement, Mansha Group – Nishat Mills, Nishat Power and MCB Bank – telecom giant Pakistan Telecommunication Company (PTCL) and Pakistan’s sole vertically integrated oil giant – Attock Group – and Pakistan State Oil among others.

Apart from results, sector-specific news included developments on the fate of the fertiliser plants on the Sui Northern Gas Pipelines (SNGPL), textile export figures for September, 2012 and Lahore High Court’s reservations regarding implementation of international clearing house, says an AKD Research note.

The fertiliser sector got its share of the limelight during the week as the government proposed a gas supply plan and urea import tender. The short-term plan included an additional 202 million cubic feet per day of gas to the plants on the SNGPL network. However, the Economic Coordination Committee ultimately scrapped the proposal over reservations of the Ministry of Water and Power, who said that since hydroelectric power generation will considerably decline during the winter, the government will not be able to tackle the power outages issue if gas is diverted from the power sector to the fertiliser sector. Only the long-term plan will be implemented which entailed construction of 1,000-kilometre pipeline, financed by gas infrastructure development cess (GIDC). The SNGPL network includes Pakarab Fertilizer, Engro Enven, Agritech Limited and the Dawood Hercules Fertilizer plants.

Furthermore, the government was also considering an additional 0.3 million tons of urea imports for the Rabi season which can put pressure on domestic producer’s pricing power. The effect of the news reflected in the negative performance of fertiliser stocks with Engro Corporation underperforming by 2.7% followed by Fauji Fertilizer Bin Qasim, down 0.6%.

Textile exports figures for September was up 12.9% year-on-year and 3.3% month-on-month, more importantly yarn exports jumped 40.8% year-on-year and 28.3% month-on-month, boding well for the textile industry coupled with strong results.

PTCL, on Friday, hit lower circuit after the Lahore High Court cancelled earlier Pakistan Telecommunication Authority’s notification of higher international calling rates under the international clearing house (ICH).

The proposed ICH gateway will converge all international calls to a single technical gateway led by PTCL against the current practice of being handled by 14 long distance international operators.

Outlook

The market will now eagerly await inflation numbers for October which are expected in the coming week. A consumer price index figure below 8% will stoke expectations of another rate cut in December and can potentially bring back the bulls. Moreover, declining bond yields is expected to bring fresh buying interest in the stock market after the Eid holidays, if law and order situation remained peaceful.

Published in The Express Tribune, October 27^th, 2012.