BULLS had complete command of the Karachi stock market during the shortened four session week — with May 1 being a holiday on account of International Labour Day.

Apart from a slight pull back on Monday, bulls continued to charge all the way to the north during the latter three sessions, with the KSE-100 index comfortably crossing the 19,000-point barrier to close Friday at a new all-time high of 19,227 points. The benchmark recorded gains of 309 points or 1.6 per cent during the week.

Market sentiments were boosted by a wave of corporate results, including those by major corporates, with several of them posting healthy quarterly earnings. Investors also displayed a mixture of hope and apprehension as the date for elections, May 11, draws closer.

Many market participants said they hoped that a business-friendly government comes into power. Yet, they were also concerned over the deterioration in law and order situation.

The Competition Commission of Pakistan’s decision to nullify the International Clearing House accord and impose a hefty fine of 7.5 per cent of annual turnover of each of the 14 long distance international (LDI) operators who were part of the agreement, was a major event during the week.

On the other hand, there were conflicting reports regarding the release of funds to tide over circular debt problems, which kept investors in energy companies under a thick cloud of suspense. Talk of IMF’s offer of the Extended Fund Facility worth $5 billion also caught investors’ attention.

Other political, economic and market related news highlights included CPI for April 2013 clocking in at a nine-year low of 5.8 per cent, dispelling near-term concerns of a discount rate hike by the central bank.

Other news included the Karachi Stock Exchange’s proposal to reduce the corporate tax rate to 25 per cent in the upcoming budget for FY14, and an OGRA notification decreasing POL prices.

This year, the Pakistani equity market has gained 13.7 per cent to-date, which has kept foreigners’ interest alive. Foreign funds continued to lead the bull-run for the fifth week in a row.

Compared with an inflow of $5.9 million in the earlier week, foreign investment in the week under review amounted to $65 million.

However, around $60 million of the dollar inflows on Friday were related to the start of the buyback of Unilever Pakistan shares by its overseas parent at Rs15,000 per share.

Meanwhile, market capitalisation surged by Rs102 billion, or 2.2 per cent in the week to Rs4.752 trillion from Rs4.650 trillion at the close of the previous week.

Despite the rally, average daily volumes were down 16 per cent to 159 million shares from the previous week’s daily average of 189 million shares.

The average daily traded value dropped by Rs89 million to Rs4.90 billion from Rs5.79 billion in the earlier week.

Leading gainers during the week included the Pak Suzuki Motor Company, Askari Bank, ICI Pakistan, Pakistan Petroleum, MCB Bank, Allied Bank, Fauji Cement, Fauji Fertilizer, Bank Al-Falah and Dawood Hercules Chemicals.

The laggards included NBP, PTCL, Engro Corporation, Nishat Chunian, Sui Northern Gas Pipelines, TRG Pakistan, and Jahangir Siddiqui & Co.

Volume leaders during the week included Fauji Cement, TRG Pakistan, PTCL, Lotte Chemical Pakistan, Engro Corporation and Maple Leaf Cement.

Financial Results: The key corporate results announcement during the week included Lucky Cement posting earning per share (eps) of Rs21.59 for nine months of financial year 2013 (9MFY13), up 49 per cent over same period last year (YoY). Fauji Cement recorded eps of Rs1.18.

Other big ticket results related to the first quarter 2013 (1Q2013). Engro reported eps of Rs3.49, while MCB announced a cash dividend at Rs3.50 per share after recording eps of Rs5.70.

Fauji Fertilizer Bin Qasim (FFBC) recorded eps of Re0.53, and Admajee Insurance at Rs5.67, showing a growth of 139 per cent YoY. JS Global analyst Naveed Tehsin commented that earnings of MCB and FFBC were above expectations, while those of Fauji Cement and Adamjee were in line with market forecasts. Engro’s earnings fell short of market expectations.

Future Outlook: With the results season at its tail end, the euphoria over corporate earnings will dissipate, and all eyes will be on elections that are barely a week away.

Analysts at KASB Securities advocate a cautious approach, as the elevated index level and a volatile law and order condition could make the situation choppy.

On the flip side, any concrete development regarding the plan to disburse funds to the energy chain could unlock value in PSO and other oil and gas stocks.

AKD Securities’ research team also believes that with elections just a week away, the law and order situation in the country could be a trigger for index volatility.

Successful elections would, however, send a positive signal to investors, which could lead to higher volumes in post-election trading.

— Dilawar Hussain


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