An extremely volatile week at the stock market ended with the benchmark KSE-100 index closing up 146 points (0.6%) after a massive rally on the final trading session of the week which saw a gain of 615 points (2.7%).
The week was curtailed to only three trading sessions as the government announced Eid holidays from August 8 to 10. Investors were expecting a dull week ahead of the holidays, but were proved wrong as the market first nosedived in the first two sessions before recovering spectacularly in the final session to end the week in the black.
The week opened on a negative note as the market was still reeling from the surprisingly high inflation figures for July. Investors also feared that a pre-condition to an IMF loan would be monetary tightening to reduce government borrowing from the central bank.
Disappointing corporate earnings also contributed to the index’s fall as Oil and Gas Development Company and Fatima Fertilizer both announced earnings below expectations during the week. Corporate earnings so far have largely been below investors’ expectations.
With two trading sessions done and a decline of 470 points (2%), a dull final day was expected. However, the market had other plans and the bulls took over, buying heavily on attractive valuations. Investors expect corporates to report healthy earnings after the Eid holidays and pounced upon the opportunity on seeing lower valuations.
Index heavyweights like OGDC and Pakistan Petroleum rose sharply by 4.6% and 4.1% during the day. The banking sector also got attraction in anticipation of higher interest rates working in their favour. MCB Bank, United Bank Limited, National Bank of Pakistan all outperformed the market during the week as a result.
Foreign buying also contributed to the market’s surge as foreigners were net buyers of $7.7 million worth of shares for the week, improving significantly on the $0.54 million invested in the previous week. Also, the Islamic Development Bank approved a $750 million loan for the country to provide budgetary support.
Despite the market’s gain, average trading volumes continued to decline and were down 8.4% to 181 million shares per day. Average daily values fell 2.5% to Rs9.01 billion. The Karachi Stock Exchange’s market capitalisation stood at Rs5.71 trillion, up 0.7% over the previous week.
The coming few weeks will be important for the bourse as clarity emerges on the expected hike in discount rate. The corporate earnings season is also set to be in full swing with the Attock Group companies, PPL and MCB Bank announcing their results. Investors should adopt a cautious approach as the market remains at extraordinarily high levels.
Published in The Express Tribune, August 9th, 2013.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ