Weekly review: KSE-100 soars to record high

Expectation of a discount rate cut and scrapping of OGDC offering provided a boost during the week

KARACHI:

The stock market rallied towards a new high as expectations of a discount rate cut fuelled activity at the bourse and pushed the benchmark KSE-100 index up by 414 points (1.3%) to close at 31,344 on Friday.

The International Monetary Fund’s (IMF) approval of the fifth and sixth tranche along with the scrapping of the Oil and Gas Development Company’s (OGDC) secondary offering boosted market sentiment and pushed the index to an all-time high of 31,629 points midweek before profit-taking on the final two trading days stopped its bull run.

With October’s inflation figures coming in below 6%, investors expected the State Bank of Pakistan to announce at least a 50 basis points reduction in the discount rate in the monetary policy announcement on Saturday that ultimately happened. The possibility of a rate cut attracted investment towards higher leveraged fertiliser and cement sectors.

The market also responded positively to the IMF’s approval of the release of $1.1 billion to the country in December which will help shore up foreign exchange reserves moving forward. The inflow is also likely to halt the devaluation of the rupee against the greenback.

Another major development was the annulment of the OGDC secondary public offering due to lack of demand. With global oil prices tumbling, investor interest in the offering was lukewarm and resulted in the government announcing that it could not sell the shares at a lower price point.

The news was well received by investors and attracted institutional buying in the OGDC, which rose 8% during the week. However, towards the end of the week the oil and gas sector took a hit as global crude oil price fell below the $80-per-barrel level, resulting in a sell-off in OGDC, PPL and POL’s shares.

The cement sector again performed strongly on the back of strong sales in the month of October while the fertiliser sector also attracted interest with Engro Corporation performing exceptionally, rising 12.7% during the week, after news circulated that it would conduct a secondary offering of its subsidiary, Engro Fertilizers.

Foreigners continued to be net buyers at the bourse and bought a net of equity worth $10 million during the week.

Average trading volumes continued to climb and stood at 283 million shares traded per day, up 6% over the previous week. Average daily also rose 16% and stood at Rs15.61 billion per day, reflecting higher activity in blue-chip stocks. The KSE’s market capitalisation rose to Rs7.30 trillion at the end of the week.

Winners of the week

Gul Ahmed Textile



Gul Ahmed Textile Mills Limited manufactures and sells textile products.

Arif Habib Corporation



Arif Habib Corporation Ltd. is a holding company. The company holds interests in the securities brokerage, investment and financial advisory, investment management, commercial banking, commodities, private equity, cement and fertiliser industries.

PTCL



Pakistan Telecommunication Company Limited provides fixed line domestic and international telephone services, telex, telegraph, fax and leased circuit services in Pakistan. The Company owns all public exchanges, the nationwide network of local telephone lines, principal long distance transmission facilities and international telephone gateways in Pakistan.

Losers of the week

Indus Motors



Indus Motor Company Limited was created through a joint venture agreement between the House of Habib, the Toyota Motor Corporation and the Toyota Tsusho Corporation, in order to assemble, manufacture and market Toyota vehicles. The company is also the sole distributor of Toyota vehicles in Pakistan.

Pakistan International Container Terminal



Pakistan International Container Terminal operates a container shipping facility in Karachi, Pakistan.

Service Industries



Service Industries Limited specialises in manufacturing tires and tubes for motorcycles, bicycles, rickshaws and trollies. The company also produces footwear.

Published in The Express Tribune, November 16^th, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.