KSE recap: Leading business sectors outperform prior to year-end
Telecom sector leads the list with 75% gains during 2013.
Expectations of the spectrum auction coupled with high international call rates meant the telecom sector gained 75% (during the year), outperforming the index. PHOTO: FILE
KARACHI:
With only 12 trading sessions left before the end of 2013, the Karachi Stock Exchange (KSE) 100-Index has already posted a gain of 53.1%.
Topline Securities Research Analyst Vahaj Ahmad said that the telecom, food, cement and textile sectors have outperformed the benchmark index so far while chemical and electricity sectors remained the underperformers.
“Expectations of the spectrum auction coupled with high international call rates meant the telecom sector gained 75% (during the year), outperforming the index by a huge margin,” said Ahmad. “It was followed by the food sector, which gained 69% year-to-date, as consumerism grew [in the economy].”
The cement sector also continued to register gains in 2013 mainly because of rising retail prices and declining financial charges. The sector saw its market capitalisation increase Rs287 billion in 2013, which is up 67% on an annual basis.
Likewise, the textile sector gained 57% on the back of better regional demand, stable prices and declining interest rates, Ahmed noted.
“This sector gained further as the European Union (EU) approved a trade package for Pakistan, allowing some of the country’s textile products duty waiver on exports to the EU,” he said while adding that both cements and textiles remained one of the best performing sectors in the Karachi stock market for two consecutive years.
Meanwhile, the oil and gas sector showed ‘decent uptick’ for the first half of 2013. Its price performance was mainly affected by exploration and production (E&P) companies’ lower full-year profits because of one-time adjustment required by tax authorities, thus resulting in the sector posting 41% return so far, commented Ahmed.
Speaking about the progress of the commercial banks, he said that the current year had been a mixed bag for the banks as the discount rate took both up and down swings.
“With the central bank linking the minimum rate on savings to the repo rate, rising interest rates towards the end of 2013 did not add much to the sector’s returns: its market capitalisation grew 44% to Rs1.2 trillion,” he added.
Amid large and medium-size sectors with market capitalisation of Rs100 billion or more, chemicals and electricity companies underperformed in 2013 with returns of 15% and 36%, respectively.
“Due to declining margins, chemicals companies showed lacklustre performance. Keeping investors’ interest high with its dividend yield play, the electricity sector recorded above average performance in the first half of the year, as its yield spread against government-backed securities raised,” Ahmed said.
“This was further fuelled by circular-debt resolution, which saw many power producers stepping up cash payouts. However, cumulative 100 basis points discount rate hike in the last two monetary policy decisions saw investors turn away from this sector to seek risk-free investments,” he added.
Published in The Express Tribune, December 14th, 2013.
With only 12 trading sessions left before the end of 2013, the Karachi Stock Exchange (KSE) 100-Index has already posted a gain of 53.1%.
Topline Securities Research Analyst Vahaj Ahmad said that the telecom, food, cement and textile sectors have outperformed the benchmark index so far while chemical and electricity sectors remained the underperformers.
“Expectations of the spectrum auction coupled with high international call rates meant the telecom sector gained 75% (during the year), outperforming the index by a huge margin,” said Ahmad. “It was followed by the food sector, which gained 69% year-to-date, as consumerism grew [in the economy].”
The cement sector also continued to register gains in 2013 mainly because of rising retail prices and declining financial charges. The sector saw its market capitalisation increase Rs287 billion in 2013, which is up 67% on an annual basis.
Likewise, the textile sector gained 57% on the back of better regional demand, stable prices and declining interest rates, Ahmed noted.
“This sector gained further as the European Union (EU) approved a trade package for Pakistan, allowing some of the country’s textile products duty waiver on exports to the EU,” he said while adding that both cements and textiles remained one of the best performing sectors in the Karachi stock market for two consecutive years.
Meanwhile, the oil and gas sector showed ‘decent uptick’ for the first half of 2013. Its price performance was mainly affected by exploration and production (E&P) companies’ lower full-year profits because of one-time adjustment required by tax authorities, thus resulting in the sector posting 41% return so far, commented Ahmed.
Speaking about the progress of the commercial banks, he said that the current year had been a mixed bag for the banks as the discount rate took both up and down swings.
“With the central bank linking the minimum rate on savings to the repo rate, rising interest rates towards the end of 2013 did not add much to the sector’s returns: its market capitalisation grew 44% to Rs1.2 trillion,” he added.
Amid large and medium-size sectors with market capitalisation of Rs100 billion or more, chemicals and electricity companies underperformed in 2013 with returns of 15% and 36%, respectively.
“Due to declining margins, chemicals companies showed lacklustre performance. Keeping investors’ interest high with its dividend yield play, the electricity sector recorded above average performance in the first half of the year, as its yield spread against government-backed securities raised,” Ahmed said.
“This was further fuelled by circular-debt resolution, which saw many power producers stepping up cash payouts. However, cumulative 100 basis points discount rate hike in the last two monetary policy decisions saw investors turn away from this sector to seek risk-free investments,” he added.
Published in The Express Tribune, December 14th, 2013.