THE Karachi stock exchange saw investors exercise caution during the trading week ended Friday. Although it was a full five -session week, the index managed to add only 37 points, or 0.22 per cent, to close at 16,848 points.

Suspense was thick in the air all through the week over the monetary policy. Analysts visualised between zero to 100 basis points cut.

The market thus moved in a narrow band of 200 points on the index during the week. Institutional investors generally remained on the sidelines, while punters and day traders continued to dabble in second and third tier stocks.

However, no one was willing to take long-term exposure and most squared their positions before the week end. Profit taking was also witnessed by investors who thought it wise to take an exit at the current high level.

Following the huge combined gain of 600 points in the preceding two weeks, the market turned dull with average daily volumes also depressed by 43 per cent to 136 million shares, compared to 239 million shares traded the earlier week. Average daily traded value also dropped by 38 per cent to Rs3.64 billion, from Rs5.82 billion previous week. Market capitalisation of KSE stood at about the same level at Rs4.2 trillion.

Foreign portfolio outflow during the week stood at $3.9 million, up from $2.2 million net sale by offshore investors the earlier week. Although the Pakistani equity market continued to boast the highest global gain of 49 per cent in equity values this year, some stock strategist noted that Thailand with a gain of 33 per cent and Philippines rising by 31 per cent, were catching up fast.

Analysts said that investors at the Pakistani bourses seemed concerned over the perpetual weakness of the rupee.

The currency lost one per cent over earlier week, while foreign exchange reserves shrank to $13.4 billion.

Analysts at KASB Securities stated that on the economic front, while assurances were given for release of $600 million under the CSF, headlines about plans to ask IMF for a deferral of SBA payment (though denied on Saturday by the Fund) or entry into new programme also clouded the outlook.

Other important news of the week included: A sign of relief for local car assemblers as the ministry of commerce issued notification reducing age limit of imported used cars to three years and 3G license auction again hitting snags. Analyst at JS Global added among the key news highlights for the week the growth in large scale manufacturing (LSM) sector coming up at 1.95 per cent in the four months of the current financial year. Key segments contributing to the growth included food, beverages, tobacco, petroleum products and iron & steel.

More news flows included decrease in trade deficit by 20 per cent in November over the same month last year. Remittances by overseas Pakistanis jumping to $5.98 billion in the five-months of the current financial year and the ECC approval of new pricing for Qadirpur gas field. On the energy front, reports indicated that the appraisal well Makori East-2 had started production. It would add 5,000 barrels per day of oil and 14 mmcfd of gas.

Top performing stocks at the KSE during the week included: Nishat Chunnian Limited, Pakistan International Container Terminal, PICIC Growth Fund, EFU Life Assurance, Al-Ghazi Tractors, Millat Tractors, Indus Motors, Attock Refinery, MCB Bank, ICI Pakistan, Kapco, UBL and Lucky Cement.

The laggards during the week were: Pakistan Services, Azgard Nine, Bata Pakistan, SNGPL, Lotte Pakistan PTA and Sui Southern Gas Pipelines.

Top-5 volume leading stocks for the week included Maple Leaf Cement; Lotte Pakistan PTA, Jah.Sidd.Co and Fauji Cement.

Future Outlook: Analysts at AKD Securities said in the post-market close news, the SBP had cut the discount rate by 50 basis points to 9.5 per cent. While leveraged sectors should benefit, analysts thought that the market had already priced in a 50bps rate cut.

“As such we expect the market to remain placid next week although banks could witness some selling pressure considering that the floor on savings was not reduced”, analysts observed and added that there was the possibility of a one point reduction in the savings account rate floor, which could be notified through a separated circular.

And KASB Securities stated that the 50bps cut was largely expected. However, banks could face near-term headwinds owing to anxiety over spread compression which could be exacerbated by the SBP omitting mention of minimum deposit rate in the MPS statement.

Analysts advocated caution at current levels and suggested selective exposure. But the Equity trader, Samar Iqbal at Topline Securities posted a bullish note.

“We expect the market to continue making new highs after the policy rate announcement, for next two months”, though he also added a word of caution: “However, year- end phenomenon may keep market activity in dull phase”. —Dilawar Hussain

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