Weekly review: Geopolitics, tumbling regional markets, macro concerns allow bears to take control

KSE 100-share index shed 2.4% in the week to close at 22,160.85 points.


Our Correspondent August 31, 2013
KSE 100-share index shed 2.4% in the week to close at 22,160.85 points.

KARACHI:


As the Syrian crisis takes its toll and regional markets experience sell-off due to currency depreciation, the Karachi stock market saw a dismal and volatile week ended August 30, when the benchmark 100-share index shed 2.4%.


Disappointing and less-than-expected earnings announcements by big names also drove sentiments down as bears tightened their grip.

The KSE-100 Index lost 554 points (2.4%) to close at 22,160.85 points. Average volumes improved 4% to 204 million shares compared to the previous week.

On the macro front, growing concerns over potential spike in oil prices and media reports suggesting recommendation from the International Monetary Fund (IMF) to the State Bank of Pakistan to buy more dollars to build up reserves resulted in a 2.7% month-on-month depreciation of the rupee against the greenback.



The week began on a positive note as the central bank decided to postpone the monetary policy statement to September 13, which boosted sentiments allowing the KSE to close in the black. The excitement was, however, short-lived as the Syrian crisis and tumbling regional markets weighed heavily on investors’ minds for the whole week.

Moreover, breakdown of the cement price arrangement and lower-than-expected dividend announcement by Pakistan State Oil (PSO) allowed bears to regain control of the bourse. PSO announced a payout of Rs2.5 per share, falling short of market expectations of Rs8-10 per share.

Hub Power Company and Kot Addu Power Company, which also made their six-month performance public during the week, announced earnings and payouts in line with market estimates.

The cement sector, which has been the best performer this year to date, finally faced panic selling after the news that industry giant Lucky Cement had left the All Pakistan Cement Manufacturers Association, raising concerns of a price war within the industry. These concerns were later on addressed by a clarification from the management that disagreements were not related to cement sales or pricing.

Many cement stocks including DG Khan Cement, Maple Leaf Cement and Kohat Cement underperformed the market.

Banking spreads squeezed further in the wake of SBP’s contractionary monetary policies, clocking in at 6.31%, while budget deficit stood at 8.2% for fiscal year 2013.

Outlook

The stance of US, North Atlantic Treaty Organization and United Nations Security Council on potential strikes on Syria will be the key event to watch out for in the next week.

Macro implications for Pakistan revolve around oil prices, where a further spike in prices will be negative for external account, inflation and fiscal policy.

Apart from geopolitics, monetary policy expectations, August inflation announcement, approval of $6.6 billion IMF loan should clear the outlook on interest rates and currency.

Winners of the week

Kohinoor Energy



Kohinoor Energy Limited owns and operates a 120MW, net capacity power plant, which is based on furnace oil fired engines.

Allied Rental Modaraba



 Allied Rental Modaraba operates an equipment rental company. The company rents branded power generators, material handling equipment and construction machines for all types of applications.

Standard Chartered Bank



Standard Chartered Bank Pakistan Limited is an international bank that provides consumer and wholesale banking services.

Losers of the week

GlaxoSmithKline Pakistan 



GlaxoSmithKline Pakistan Limited manufactures and markets pharmaceuticals and animal health products.

Pakistan Cables



 

Pakistan Cables Limited manufactures and distributes copper rods, wires, cables and conductors, aluminium profiles and anodized fabrications.

Jahangir Siddiqui and Company



Jahangir Siddiqui and Company is an investment company offering share brokerage, money market, advisory and consultancy, underwriting and portfolio management services.

Published in The Express Tribune, September 1st, 2013.

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