Weekly review: Volatile market ends week with mild gains

Investors choose to book profits ahead of year-end as index gains 0.6%.

KARACHI: The stock market witnessed a volatile week as the benchmark KSE-100 index fluctuated back and forth with profit-takers stepping in to cash in on the inflated levels. The index ended the week with mild gains of 0.6 per cent (72 points).

The market has been on the ascendancy for the last three months and has managed to climb around 19 per cent during the period. The index currently stands at 11,858 points and looks set to breach the 12,000-point barrier as earnings season begins with the start of 2011.

As the year comes to a close, most local investors chose to book profits and the index was largely supported by foreign buyers who bought a net $5.5 million shares during the week. Foreigners bought a net $22.7 million shares in the three days of the previous week.

The week started on a fairly positive note as the visit of Chinese premier drew to a close and deals worth $35 billion were signed with Beijing. Investors reacted positively and the index managed to climb as high as 11,927 points before closing at 11,843 points on Monday, up by 0.5 per cent.

The market fell on Tuesday, only to recover the same amount on Wednesday before declining 0.5 per cent on Thursday. Friday saw a gain of 0.6 per cent in the index.

Positive activity was witnessed in various sectors, led by oil sector as global oil prices continued to climb. Pakistan Petroleum Limited (PPL) and Pakistan Oilfields Limited (POL) remained in the limelight as foreign buying was focused on these stocks.

Pakistan State Oil (PSO) also climbed a solid 2.8 per cent during the week as reports circulated that the finance ministry was going to release Rs35 billion to reduce circular debt. Hub Power Company (Hubco) also benefitted from the news.

The fertiliser sector also witnessed a strong rally on news that the price of urea was expected to climb to Rs192 per bag. Engro Corporation’s new plant is also expected to go online in the second week of January, resulting in the scrip climbing by two per cent.

Fauji Fertiliser Bin Qasim and Fauji Fertiliser Company also climbed by 4.1 per cent and 2.8 per cent, respectively.

The textile sector benefitted from rising cotton prices in the world market. Most of Pakistan’s major textile units have already completed their cotton purchases for the current season and rising cotton prices will translate into bigger profits for them. Nishat Mills and Nishat Chunian climbed by 3.4 per cent and two per cent respectively.

As profit-taking set in, investors chose to be more cautious and this was reflected in average daily volumes declining by 32 per cent to 100 million shares per day. Total market capitalisation climbed by 0.6 per cent and stood at Rs3.2 trillion. Although foreigners were net buyers of $5.5 million worth of shares, local banks sold $16.4 million worth of stocks during the week.

What to expect?

Although the KSE-100 index has managed to defy odds and has continued to climb continuously for the last three months, investors have been asked to tread carefully going into the future.

Although the upcoming earnings season is expected to provide impetus to the market, it should be kept in mind that during 2010, the earnings seasons were when investors chose to book profits and the market declined as a result.

Furthermore, the perpetual political ramblings can easily trigger a sell-off and thus investors should remain wary. Investing in ‘safe’ stocks like PPL, POL, Hubco, MCB and PSO is recommended.

Monday, December 20

Stocks continued to firm and closed at a 30-month high as investor confidence rose following a peaceful Muharram. The Karachi Stock Exchange benchmark 100-share index ended 0.49 per cent or 57.56 points higher.

Tuesday, December 21

Contrary to the performance of regional stock markets, the Karachi bourse eased as investors booked profits led by oil stocks, according to analysts. The Karachi Stock Exchange benchmark 100-share index ended 0.16 per cent or 18.59 points lower.

Wednesday, December 22

Stocks rose marginally in thin trade as profit-taking continued in the oil sector following soaring crude oil prices in Asia. The Karachi Stock Exchange (KSE) benchmark 100-share index ended 0.2 per cent or 23.56 points higher.

Thursday, December 23

The stock market fell as investors preferred to book profits ahead of the new year, according to analysts. The Karachi Stock Exchange (KSE) benchmark 100-share index ended 0.47 per cent or 55.79 points lower.

Friday, December 24

The stock market rose 65 points on the last trading day of the week following flow of positive news and release of $633 million from US. The Karachi Stock Exchange benchmark 100-share index ended 0.55 per cent higher.

Published in The Express Tribune, December 26^th, 2010.