Weekly review: KSE ends week, year with a bang

Analysts hope for positive triggers in 2011.

Express January 02, 2011

KARACHI: The Karachi Stock Exchange (KSE) witnessed the traditional year-end rally to give a cheerful farewell to 2010. Despite late selling on the last trading day of the year, KSE-100 index registered an increase of 1.4 per cent to end the outgoing year at 12,022 points – its highest since July 2008.

Overall, the benchmark index provided returns of about 28 per cent year-on-year.

Foreign inflows for the week clocked in at higher levels with the net amount standing at $12.2 million, compared with just $5.5 million in the preceding week. The net inflow of foreign investments for the year tallied at an impressive $526 million.

United Bank Limited (UBL) and Fauji Fertiliser Company (FFC) dominated discussions at the bourse during the week. Bestway Group’s acquisition of an additional 20 per cent stake in the bank encouraged positivity amongst investors, as did the disbursement of $633 million to the country as part of the Coalition Support Fund from the United States.

FFC’s stock ticker continued to rise despite an explanation call issued by the government to fertiliser companies over the increase in the price of fertiliser.

Although the market did not immediately respond positively to the International Monetary Fund’s nine-month extension for meeting conditions attached to the standby arrangement, the decision eased uncertainty on the political front to some extent.

Market activity during the week was heavily concentrated in blue-chip stocks, particularly from the energy sector as investors took cue from rising international oil prices. “Despite political noise, the oil and gas sector along with the banking sector stole the show at the bourse during the week,” read a KASB research report.

While the index ended the year at its highest level since July 2008, market volumes told a different tale. Average daily volumes were down 30 per cent compared with 2009, standing at a meagre average of 121 million shares.

What to expect this year?

InvestCap analyst Imran Safdar termed the immediate outlook for equity prices ‘neutral’, citing the tug of war on the political front, coupled with the silver lining of earnings growth and economic recovery.

“With the election of new directors at the exchange, a new round of negotiations on the leverage product may start and any positive outcomes should drive the index up,” stressed analyst Imtiaz Gadar in a research report. The report also termed the commencement of trial operations at Engro’s new urea plant positive for future trade sessions at the bourse.

After a difficult year, analysts maintain a positive view on the market on the back of foreign inflows, strong growth in earnings, potential introduction of a leverage product and post-flood reconstruction activities.

Nonetheless, it is important to note that higher-than-anticipated commodity prices and discontinuation of the IMF programme remain key risks.

Monday, December 27

The stock market opened the week with a bang as the bourse surged 52 points to close at a 30-month high while volumes remained at a month low.

The Karachi Stock Exchange benchmark 100-share index ended 0.43 per cent or 51.56 points higher at 11,909.73.

Tuesday, December 28

The conflict between the government and coalition partners caused jitters among investors who trimmed their positions especially in oil and fertiliser stocks, according to analysts.

The 100-share index ended 0.52 per cent or 61.68 points lower at 11,848.05.

Wednesday, December 29

Renewed local buying interest in banking stocks helped the index rise 38 points on Wednesday, in line with regional markets.

The benchmark index ended 0.32 per cent higher at 11,886.02 points.

Thursday, December 30

Investors welcomed the newly elected board members at the KSE as the benchmark index at the bourse closed at a 30-month high on Thursday.

The 100-share index rose 145.44 points, or 1.22 per cent, to end the day’s trade at 12,031.46 points.

Friday, December 31

Mixed performance was witnessed on the last trading session of the year and the index managed to close flat at 12,022.46 points after a decline of nine points, or 0.07 per cent.

Published in The Express Tribune, January 2nd, 2011.


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