Sentiment at the stock market once again turned bullish after a one-week breather as the benchmark KSE-100 index rose 950 points (3%) to close at a new all-time high of 32,148 points during the week ended December 5.
The sharp drop in inflation numbers for November proved to be the catalyst that the market needed and triggered a buying spree. A slight improvement on the political front and robust cement sales also contributed to the positive atmosphere and aided the index’s upward drive.
Even the laggard oil and gas sector could not stem the flow as buying was recorded across the board, throughout the week with the KSE-100 index closing in the black in all five trading sessions. However, concerns remained over the continuing decline in global oil prices.
The highlight of the week was the announcement of the Consumer Price Index (CPI) figures for November. Inflation for the month clock up just 3.96%, an 11-year low, and was well below expectations which ranged between 4.5% and 5%.
With petroleum product prices on the decline, it is highly likely that inflation will continue to fall in the coming months and will result in the State Bank reducing the discount rate in its upcoming monetary policy announcement. The next policy announcement is in January and investors now expect the central bank to cut the rate aggressively.
This triggered a rally in high-yield and highly leveraged stocks. High-yielding IPPs were the major beneficiaries with Hubco and Kapco both showing significant gains while banks also gained due to their investment in longer-term and higher-yielding Pakistan Investment Bonds.
The cement sector continued to perform strongly due to impressive sales and on expectations of a discount rate cut. The majority of the sector remains highly leveraged and is in a prime position to take advantage of any rate cuts.
Over the course of the week, political tensions eased after the opposition Pakistan Tehreek-e-Insaf held a major, but peaceful, gathering in the capital Islamabad over the weekend. It emerged that the government and the PTI were again willing to engage in dialogue to break the political impasse, which provided a boost to investor confidence.
The oil and gas sector continued to be a laggard due to the declining global oil prices. However, Oil and Gas Development Company (OGDC) recorded some gains towards the end of the week due to a hydrocarbon discovery in Attock and also due to value buying at its currently attractive price.
Average trading volumes shot up by a massive 67.5% and stood at a healthy 350 million shares per day. Similarly, average daily values also rose 50.9% to Rs16.9 billion. The Karachi Stock Exchange’s market capitalisation stood at Rs7.35 trillion ($72 billion) at the end of the week.
Winners of the week
TRG Pakistan operates as an information technology company. The company provides business support and software services to companies. TRG Pakistan manages call centres and offices located in Pakistan and elsewhere throughout the world.
Shezan International Limited manufactures and sells juices, beverages, pickles, preserves, and flavorings which are all derived from fresh fruits and vegetables.
Kohinoor Textile Mills Limited produces textiles. The company weaves, dyes, and prints natural and synthetic fibers.
Losers of the week
Murree Brewery Company Limited specialises in the manufacture of beer and Pakistan Made Foreign Liquor. The group also has juice extraction and food manufacturing divisions, located at Rawalpindi and Hattar respectively. Their glass division manufactures all the group’s bottles and jars.
Pakistan Oilfields Limited
Pakistan Oilfields Limited (POL) is a leading oil and gas exploration and production company. Its prime focus is to deliver performance through excellence in the field of exploration, drilling and production of crude oil and gas.
Pakistan Petroleum Limited
Pakistan Petroleum Limited specialises in the exploration and production of crude oil and natural gas. The company also sells liquefied petroleum gas and condensates.
Published in The Express Tribune, December 7th, 2014.