Hopes of resolution of energy crisis and heavy foreign investment take the bourse to fresh peak.
The market has kept unbelievable momentum over the last six weeks and has shoved any resistance on its way to hitting the all-time high of 22,359 points. The index had put in a stunning performance during May, climbing by almost 15%.
The week saw the election of Nawaz Sharif as prime minister of the country for an unprecedented third time and was welcomed by all corners of the business community. Sharif’s PML-N swept to power in the general elections by focusing its campaign on the resolution of the country’s energy crisis.
And true to his word, Sharif immediately convened an energy conference to work out consensus on how to bring an immediate and long-term resolution to the energy woes. It is widely expected that the government will raise money to flush out inter-corporate debt from the energy chain, which can potentially result in a windfall for the entire sector.
The resolution of inter-corporate debt will have a positive impact on every company involved in the energy sector, which includes oil marketing companies, oil refineries, power generation companies and electricity distribution companies. These companies carry a significant chunk of weight in the KSE-100 index.
The market rally was supported by continuous inflow of foreign funds, which stood at a net $29 million, more than double the solid inflow of $11 million during the previous week.
There was positive news from the macro side too as inflation for May stood at 5.1%, a nine-year low. The low inflation set off speculation that the State Bank of Pakistan will further slash the discount rate in its upcoming monetary policy announcement.
Support was also provided by heavy activity in the companies owned by the Mansha Group, particularly MCB Bank, which is one of the largest banks in the country. The bank’s share price rose a phenomenal 19.5% during the week.
However, there was reason to be sceptical as the Federal Board of Revenue proposed that inter-corporate dividends should be taxed at the normal 35% corporate tax rate, instead of the 10% current rate. If the proposal is included in the budget, it can make a dent in the bottom lines of companies which have a high dividend yield.
Average trading volumes on the KSE were up 12% to stand at 516 million shares per day for the week. Average daily value was up 15.6% and stood at Rs12.89 billion.
The market capitalisation increased 1.8% to Rs5.39 trillion by the end of the week.
Winners
GlaxoSmithKline
GlaxoSmithKline Pakistan manufactures and markets pharmaceuticals and animal health products.
MCB Bank
MCB Bank is a full service commercial bank. The bank offers a wide range of financial products and advice for personal and corporate customers, including online banking services.
NetSol Technologies
NetSol Technologies provides information technology solutions and services. The company’s services include custom software development, technology outsourcing, systems integration, application development, and business intelligence consulting.
Losers
Mari Gas Company
Mari Gas Company specialises in the drilling, production and selling of natural gas.
NIB Bank
NIB Bank is a commercial bank operating in Pakistan.
Bankislami Pakistan
Bankislami Pakistan attracts deposits and offers Islamic banking services. The bank offers mortgage and automobile loans, lease financing, wealth management services, and letters of credit and guarantee.
Published in The Express Tribune, June 9th, 2013.
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