Weekly Review: Bourse hits all-time high of 16,574 points

Activity picks up in anticipation of discount rate cut, to be announced by the central bank this week.

KARACHI: The stock market broke free from its consolidation phase as anticipation of a discount rate cut led to the benchmark KSE-100 index hitting an all-time high of 16,574 points, posting a gain of 2.1%, during the week.

The index’s gain was supported by an uptick in foreign buying and due to investor interest in the cement, textiles and the banking sector. Despite depreciation of the Pakistani rupee and a decline in the country’s foreign exchange reserves, the stock market managed to put in an impressive performance.

The bourse was able to sustain the high volumes witnessed in the previous week and average daily volumes rose by 15% to 292 million shares traded per day. With the State Bank of Pakistan due to announce its bimonthly monetary policy in the coming week, expectations of a discount rate cut were raised as the 6-month treasury bills yield stood at 9.34% in the latest auction held during the current week.



If inflation numbers manage to hold steady, it is highly likely that the central bank will slash the discount rate by another 50 basis points, dropping it to 9.5%. The inflation numbers for the month of November will be revealed during the coming week. Foreigners remained steady buyers throughout the week and were net purchasers of equity worth $6.7 million. Total foreign buying for 2012 currently stands at $133 million, a jump of 229% over the previous year.

The market volumes were helped by interest in cement, textile and banking sectors. The cement sector continued to gain traction on rumours of an increase in cement prices. The sector has been the star performer so far during the year, and is continuing to perform strongly.

Similarly, the textile sector had performed well in the previous weeks due to trade concessions from the European Union and the depreciation of the rupee. The banking sector too came into the spotlight, on anticipation of high dividends in full year results at the end of the current year.

On the macro front, the rupee continued to depreciate against the dollar and lost 0.6% of its value. The devaluation was triggered as a result of the country’s foreign reserves declining to $13.58 billion.

The increase in volumes also resulted in an increase in daily values, which jumped 36.7% to Rs6.3 billion traded per day. This was due to the return to activity in blue-chip banking and textile stocks. The market capitalisation rose 2% to Rs4.15 trillion.

What to expect

The inflation numbers for the month of November will be closely monitored in the coming week as they will provide a clear indicator regarding a possible discount rate cut. Activity in stocks with high dividend yields can also expect momentum as the year end approaches.

Winners of the week

Grays of Cambridge






Grays of Cambridge (Pakistan) Limited is primarily engaged in manufacturing sporting goods including hockey sticks. It has a cricket ball manufacturing unit which produces balls with famous brand names like Duke & Sons and Gray-Nicolls.

Bata (Pakistan)   



       

Bata (Pakistan) 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.

KESC    



     

Karachi Electric Supply Company (KESC) is engaged in the generation, transmission and distribution of electricity to industrial, commercial, agricultural and residential consumers. It covers an area of 6,000 square kilometres.

Losers of the week

Pakistan Cables  



      

The company’s principal activity is to manufacture and market telecommunication wires and cables. Pakistan Telephone Cables sells its products to consumers like Pakistan Telecommunications Company Limited, Special Communication Organization and Pakistan Ordnance Factories.

Pace (Pakistan)






Pace (Pakistan) Limited is part of a larger conglomerate, the First Capital Group, which owns and operates a number of businesses in the financial services, real estate development, media and telecom sectors in the country and abroad.

Kohinoor Energy






Kohinoor Energy Limited owns, operates and maintains a power station of 124 megawatts in Lahore. Water and Power Development Authority is the sole customer of the company, which was incorporated in 1994.

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