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Investors cautious

THE Karachi stock market witnessed mixed investor sentiments during the outgoing week, as the benchmark KSE-100 index closed at 13,925 points, representing a small gain of 67 points over the earlier week.

The first two sessions of the week saw the index post cumulative gain of two per cent with the index crossing the 14,000 points barrier. Yet profit taking in the last three sessions wiped out much of the benefit and the weekly gain stood trimmed to 0.5 per cent.

Average daily traded volumes increased by 8.4 per cent over the previous week to 156 million shares, while average traded value rose by 3.6 per cent to $68 million. The turnover though slightly better than of the earlier week, the business was, however, noticed to have dropped significantly in the past two weeks from the earlier high weekly volumes.

Foreigners were major buyers during the week, with net portfolio inflow of $12.3m, quite in contrast to the net foreign selling of $6m worth equity the previous week. Most market participants said the index would have drifted south, if the foreign inflow in the substantial sum had not come to the market rescue. With global equity markets generally turning weak, haunted by the fear of Greece exit from Euro zone and its repercussions, the entry of overseas investors in Pakistani market were thought to be a good omen.

“As a result of low valuations and high dividend yields compared to its peers, the local equity market attracts offshore buyers in energy, fertiliser and cement stocks,” said Arif Habib, a former chairman of KSE.

Analyst Yawar Uz Zaman at brokerage InvestCap commented that regardless of happy ending of NATO summit at Chicago, no development was seen in the resumption of supplies to Afghanistan, which depressed investor sentiments and the market remained in consolidation phase during the week.

Furthermore, fertiliser stocks once again came under pressure on account of the possibility of levy of additional gas infrastructural surcharge (cess) on feedstock gas price. However, increase was seen in prices of cement stocks, which was attributed to another increase of Rs10 per bag of cement, during the week. Also the expected allocation of Rs873bn for Public Sector Development Programme (PSDP) was expected to further boost cement demand.

On economic front, rupee depreciated to its lowest level against the dollar. However, workers’ remittances amounted to $10.9bn in the ten-months of the current financial year, showing 20 per cent upsurge over the same time last year.

Analyst Furqan Ayub at JS Global also talked about the unresolved NATO supply issue that kept capital market under cloud of uncertainty.

And to make matters the worst, the fragile law and order situation in Karachi also hurt investor sentiments over the week. However, encouraging news regarding cement sector went to consolidate the local bourse.

“According to news reports citing budgetary documents obtained from the finance ministry, the GDP growth target for financial year 2013 has been set at 4.3 per cent while inflation target is at 9.5 per cent. Current account deficit is anticipated at $4.8bn,” analyst said.

Among the stocks that were leaders and the laggards on the stock market during the week, cement stocks remained in demand on increasing prices and anticipation of positive budgetary measures for the sector. The two biggest concrete producers, Lucky and D. G. Khan Cement outperformed the market by 4.3 per cent and 5.1 per cent respectively. Conversely, Fauji Fertiliser and Fauji Fertiliser Bin Qasim underperformed the market by 5.5 per cent and 1.1 per cent, respectively on news of a possible increase in gas infrastructure development surcharge.

Futures counter: The stock market’s open interest was up by Rs397m or 14.4 per cent over the earlier week, to close at Rs3.2bn, while, futures’ volumes increased by 58 per cent over the previous week to an average of 22m shares. Moreover, futures spreads went down by 246 basis points over the earlier week to nine per cent. The top-5 stocks on the futures counter holding 60 per cent of the total open interest included DGKC, Engro, FFC, AHCL and Lucky Cement.—Dilawar Hussain