Market rally finally ends as profit-taking sets in
Foreigners turn net sellers after 21 weeks of buying.
KARACHI:
The stock market rally finally came to an end this week as investors chose to book profits as corporate earnings were announced. The benchmark KSE-100 index dropped 0.5 per cent (54 points) to 10,598 points for the week ended October 29.
The market had grown by 5.2 per cent in the last three weeks as investor sentiments improved amid easing political tensions in the country, positive macro numbers and the start of corporate earnings season.
The previous week saw the KSE-100 index climb by 1.7 per cent as the earnings season kicked off with positive results for heavyweights in the energy and power, fertiliser and banking sectors. But the positive sentiments proved to be short-lived as investors chose to book profits as earnings announcements were made during the week.
Foreigners, who had been net buyers for the last 21 weeks, finally turned sellers this week as they offloaded a net $2.8 million worth of stocks. The previous month saw a net inflow of around $28 million from foreign buyers.
The end of foreign buying is even more significant as it was the one thing that was constant over the previous half of the year in the volatile market which hovered between 9,500 and 10,500 points during that time.
The energy and power sector was again at the forefront during the week as the Oil and Gas Development Company beat market expectations with earnings of Rs3.89 per share, following Pakistan Petroleum’s excellent result in the previous week.
The fertiliser sector, though, had bad news as Fauji Fertiliser Company announced earnings below market expectations while the banking sector continued its momentum as MCB Bank announced earnings of Rs5.99 per share, well above market expectations.
During the week, the State Bank of Pakistan also released its annual review of the country’s economy in financial year 2010 and projections for FY11. Due to the floods, the State Bank lowered projected GDP growth in FY11 to 2-3 per cent and increased the inflation target to 13.5-14.5 per cent, thus projecting a negative outlook and the possibility of further monetary tightening.
Average daily volumes continued to rise and climbed further by 9.3 per cent to 132.95 million shares per day, reflecting increased local interest in the stock market. Volumes have constantly improved over the previous month and have well and truly recovered from the abysmal levels witnessed in the first few months of the current fiscal year.
Total market capitalisation declined by 0.5 per cent to Rs2.90 trillion by the end of the week. While foreigners became net sellers, local companies and banks were net buyers during the week.
What to expect?
The end of the market rally could be a signal of correction period and further declines cannot be ruled out. But at the same time, corporate earnings have been above expectations and additional positive triggers could take the market to the green once again.
Macro numbers, corporate announcements and anticipation of the monetary policy announcement in November will be the main driving factors for the market.
Published in The Express Tribune, October 31st, 2010.
The stock market rally finally came to an end this week as investors chose to book profits as corporate earnings were announced. The benchmark KSE-100 index dropped 0.5 per cent (54 points) to 10,598 points for the week ended October 29.
The market had grown by 5.2 per cent in the last three weeks as investor sentiments improved amid easing political tensions in the country, positive macro numbers and the start of corporate earnings season.
The previous week saw the KSE-100 index climb by 1.7 per cent as the earnings season kicked off with positive results for heavyweights in the energy and power, fertiliser and banking sectors. But the positive sentiments proved to be short-lived as investors chose to book profits as earnings announcements were made during the week.
Foreigners, who had been net buyers for the last 21 weeks, finally turned sellers this week as they offloaded a net $2.8 million worth of stocks. The previous month saw a net inflow of around $28 million from foreign buyers.
The end of foreign buying is even more significant as it was the one thing that was constant over the previous half of the year in the volatile market which hovered between 9,500 and 10,500 points during that time.
The energy and power sector was again at the forefront during the week as the Oil and Gas Development Company beat market expectations with earnings of Rs3.89 per share, following Pakistan Petroleum’s excellent result in the previous week.
The fertiliser sector, though, had bad news as Fauji Fertiliser Company announced earnings below market expectations while the banking sector continued its momentum as MCB Bank announced earnings of Rs5.99 per share, well above market expectations.
During the week, the State Bank of Pakistan also released its annual review of the country’s economy in financial year 2010 and projections for FY11. Due to the floods, the State Bank lowered projected GDP growth in FY11 to 2-3 per cent and increased the inflation target to 13.5-14.5 per cent, thus projecting a negative outlook and the possibility of further monetary tightening.
Average daily volumes continued to rise and climbed further by 9.3 per cent to 132.95 million shares per day, reflecting increased local interest in the stock market. Volumes have constantly improved over the previous month and have well and truly recovered from the abysmal levels witnessed in the first few months of the current fiscal year.
Total market capitalisation declined by 0.5 per cent to Rs2.90 trillion by the end of the week. While foreigners became net sellers, local companies and banks were net buyers during the week.
What to expect?
The end of the market rally could be a signal of correction period and further declines cannot be ruled out. But at the same time, corporate earnings have been above expectations and additional positive triggers could take the market to the green once again.
Macro numbers, corporate announcements and anticipation of the monetary policy announcement in November will be the main driving factors for the market.
Published in The Express Tribune, October 31st, 2010.