Weekly Review: Profit-taking drags Karachi Stock Exchange down 1.83%

Investors chose to book profits ahead of Eid holidays.

KARACHI: The stock market took a downward turn with across-the-board profit-taking, resulting in the benchmark KSE-100 index falling by 406 points during the shortened week ended August 1.

Eid holidays, to mark the end of the holy month of Ramazan, are due next week and profit-taking is usually recorded ahead of the annual holidays. This year was no different as lack of triggers and mixed corporate earnings did not help the market in negating the trend.

Trading sessions were curtailed to four days this week as the stock exchange remains closed on the last Friday of Ramazan to mark Jummatul Wida. The market kicked off the week on a negative note and ended it in a similar fashion with across-the-board profit-taking on the last trading session of the week.

The market was devoid of triggers and corporate earnings were also unable to provide support as half-year results from two major companies were a mixed bag. Fauji Fertilizer Company reported above-expectation earnings of Rs7.46 per share with a payout of Rs3.75 per share.



However, this was negated by below-expectation earnings of Rs1.46 per share for Engro Foods. The company, which has been the star performer at the market for almost 12 months, failed to meet investor expectations of sustained growth after its half-year sales declined by 4% year-on-year.

Investors also took a cautious approach after the release of inflation figures for July. The Consumer Price Index (CPI) clocked in at 8.26% for the month compared to 5.85% in June and came as a shock to investors, who now fear that the State Bank will raise the discount rate by 100-150 basis points to control inflation.

There was further bad news for businesses as the Council of Common Interests approved a hike in electricity tariff for industrial and commercial consumers. The hike will range from anywhere between 30% and 60% and will be effective from August 1. The tariff rise is likely to have a mildly negative impact on corporate earnings.

There was some positive news as well, as the Asian Development Bank approved $500 million in budgetary support for the country to stem the decline in foreign exchange reserves and, in turn, stabilise the local currency. The rupee shed 2.1% of its value against the US dollar in July alone.

Another highlight of the week was that Russian telecom giant Vimpelcom entered the fray to buy out operations of Warid Telecom from the Abu Dhabi Group. The news makes it a two-way competition for the purchase of the country’s fourth largest cellular network operator, with UAE-based Etisalat also expressing interest in acquiring the company in the previous week.

Average trading volumes on the KSE fell sharply by 34.4% to 198 million shares per day, while average daily values dropped by 24.4% to Rs9.24 billion. The Karachi Stock Exchange’s capitalisation stood at Rs5.67 trillion at the end of the week.

Winners

Siemens Engineering



Siemens Pakistan Engineering Company Limited manufactures, installs, and sells electronic and electrical products. The company develops products for industries that include energy, industry, communications, information, transportation, healthcare, components, and lighting.

Mari Petroleum



Mari Petroleum Limited specialises in the drilling, production and selling of natural gas and oil.

Sui Southern Gas Company



Sui Southern Gas Company Limited transmits and distributes natural gas, and constructs high pressure transmission and low pressure distribution systems. The company’s transmission system extends from Sui in Balcohistan to Karachi in Sindh, located in Pakistan.

Losers

Engro Foods



Engro Foods produces a wide range of dairy products. The company’s products include ice cream, flavoured milk, fruit juices and milk powders.

Kohinoor Energy



Kohinoor Energy Limited owns and operates a 120 MW, net capacity thermal power plant.

Lafarge Pakistan



Lafarge Pakistan Cement Company Limited manufactures and sells cement. 

Published in The Express Tribune, August 4^th, 2013.

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