THE Karachi stock exchange extended its winning streak with the KSE-100 index gaining another 234 points to close at 16,808 points on Friday.

The market was at its highest ever with the bulls in full control including the giant leap of 336 points that the index took the earlier week, the market has gained almost 600 points in ten trading sessions.

On Friday, the last trading day, as the index crossed the 16,900 level for a brief moment, traders and brokers cheered, though at such a dizzy height, many stock strategists called for caution.

Adding to the last week, the KSE-100 index return in equities stood at 49 per cent this year to-date, decisively outperforming all the regional and global markets. Yet after several weeks of foreign portfolio inflow including investment of $6.7 million the week earlier, foreigners turned net sellers in the week concluding Friday with net outflow of $2.2 million from Pakistan bourses. Market capitalisation of KSE amounted to Rs4.2 trillion, equivalent to $43 billion.

The average daily trading volume, however, shrank by 18.7 per cent to 239 million shares, from 292 million shares the earlier week. An analyst at a major stock brokerage house said the redeeming factor was that the market was reverting to main board, as the stocks in KSE-30 index contributed 29 per cent to the volume, compared with 25 per cent the previous week. However, analysts at JS Global pointed out that the second and third tier stocks had remained in the limelight.

Brokers said the major news dictating market sentiment during the week included encouraging cement off take numbers for November; a statement by the finance minister that the US would soon disburse $500 million in lieu of CSF payment due to Pakistan and a commitment by the US to provide $200 million to finance the Diamer Bhasha Dam.

Major development impacting telecom sector was the Pakistan Telecommunication Authority issuance of notification to suspend international Clearing House (ICH) agreement.

“The week started with positive development on CPI inflation which for the month of November clocked in at 6.9 per cent”, said a senior analyst, adding that it gave boost to the expectations of 50 basis points cut in discount rate in the upcoming SBP Monetary Policy Statement.

Other news flow included government consideration of 9.87 per cent hike in gas prices from January next year; ministry of petroleum pitched plan to phase out CNG industry and the government’s efforts to make some stop gap arrangements for resumption of gas supply to fertiliser plants, in exchange for urea price cut by around 25 per cent.

Stocks that showed the biggest gains during the week included Grays of Cambridge, Lotte Pakistan PTA, PICIC Growth Fund, Bank of Khyber, Colgate Palmolive and Honda Cars. The losers in the week were led by Pakistan Telecom, followed by Unilever; Adamjee Insurance, Shifa International Hospitals; Bankislami Pakistan, National Foods and Agriauto.

The analysts at AKD research identified Top-5 volume leaders for the week as Lotte Pakistan PTA, Jah.Sidd.Co, Fauji Cement, Byco Petroleum and Azgard Nine Limited.

Future Outlook : Much of the market thought that the Monetary Policy Statement, expected next week, with expected 50 basis points discount rate cut had been priced in the stock values. “Other than this, any concrete developments over potential disbursement of CSF should also alleviate concerns over external account”, said analyst at brokerage KASB Securities.

They added that with year-end just a month away, interest in banking stocks was  gradually building up.

Yet the analysts continued to advocate caution at the current levels given the sharp run up in stock prices.

Research team at AKD Securities stated that going forward, investors were likely to eye the MPS for direction of the market. The brokerage expects cut in discount rate between 50 to 100 basis points.—Dilawar Hussain