Weekly Review: KSE-100 breaches 16,000-point barrier, closes at historic peak

Upward trend mainly driven by monetary easing hopes, results season.

KARACHI:

After several futile attempts, the local bourse was able to break the 16,000-point barrier, mainly driven by excitement of monetary easing hopes which was further cemented by inflation figures released for the month and results for the first quarter of fiscal 2013.

The benchmark index managed to close at 16,101.55 points, up 1.8% from previous week’s 15,812.72. The market was able to extend its bullish momentum during October 2012, bringing current year to date gains to a robust 40%, making Pakistan one of the best performing equity markets in the world, says an AKD Research note.

Market expectations were realised on Friday after the announcement of October’s inflation figures by the government, the last trading session of the week alone contributed 0.85% gain to the index. The consumer price index clocked in at 7.66%, lowest in five and half years, against 8.79% in September, thus raising the hopes for another interest rate cut by the State Bank of Pakistan in its next monetary policy statement due in December.

Activity at the local bourse picked up this week with average daily turnover of 150 million shares, up 13% with cement and textile sector in the limelight, while net foreign inflow for the outgoing week clocked in at $12.6 million.

With results season coming to a close, they were generally thin during the week. Cement stocks attracted buying over optimistic outlook for off-take numbers given seasonally strong period for construction activity, said a KASB Securities analyst note. Off-take numbers were expected to be boosted due to ongoing work on the Diamer Bhasha Dam, reconstruction activities in flood affected areas. Moreover, lower interest rates also help better future prospects for this highly leveraged sector.

The European Union, finally, published its revised import preference scheme – GSP plus – which will be effective from January 2014. Pakistan was expected to officially submit an application to the EU in January 2013. If granted, Pakistan exports, including textile, to Europe will be on a zero-tariff basis. The news triggered bullish sentiments regarding the textile industry.

Outlook

With result season now over, market sentiment in the short-term is likely be dictated by macroeconomic developments, latent balance of payments concerns risk coming to the forefront with International Monetary Fund repayments of $600 million due in November, 2012.

Besides this, takeaways from Moody’s report saw the rating agency raise caution on room for future easing while highlighting a precarious foreign exchange reserves position for Pakistan. Official international reserves of $9.8 billion are currently adequate to cover debt payments falling due in 2013.

Moreover, while the national reconciliation ordinance (NRO) case had simmered down, focus will shift to dual office case against the president. However, judiciary’s importance for the Karachi Stock Exchange was now beyond merely political, as intervention by courts in a range of issues will follow through impact on sector and stock price performances.

Winners of the week

Attock Cement

Attock Cement Pakistan Limited is engaged in the manufacture and sale of cement in Pakistan. The company offers Portland cement, sulphate resistant cement, and Portland blast furnace slag cement under the ‘Falcon Cement’ brand name.

IGI Insurance

IGI Insurance Limited operates in four segments: fire, marine, motor and miscellaneous. The company is a flagship organisation of the Packages Group. IGI provides comprehensive risk management facilities to a number of companies.

Pak Services

Pakistan Services Limited is primarily engaged in hotel business. It owns and operates the Pearl Continental chain of hotels in the country and Azad Jammu and Kashmir. Its subsidiaries include rent-a-car, tour packages and project management.

Losers of the week

NetSol Technologies

Netsol Technologies is engaged in the development and sale of computer software and related services. The company’s services include application development and maintenance, technology outsourcing, IT consulting, system integration and business consulting.

Kohinoor Energy

The company operates a furnace oil power station with a net capacity of 124 megawatts in Lahore. It sells the output to the Water and Power Development Authority (Wapda).

Agriauto Industries

Agriauto Industries engages in the manufacture and sale of components for automotive vehicles, motorcycles, and agricultural tractors in Pakistan. Its products include shock absorbers and struts, pipe fork, cylinder sleeves, gaskets, camshafts, door lock and hinges, and steering box.

Published in The Express Tribune, November 4^th, 2012.