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Stocks end flat as investors stay on sidelines

January 13, 2013

Shares at the Karachi Stock market ended flat in the week ended Friday with the KSE-100 index stepping down by just 14 points to close at 16,635 points, from 16,649 points at the start of the week on Monday.

Market participants said it was a relief to see the end of a pullback which had resulted in index plunge by 294 points the preceding week. Investors, who rushed to book profit, ahead of the unfolding political events and the looming threat of the ‘long march’ slated to be held on Jan 14, decided to stay on the sidelines in the week ended Friday.

Yet a bigger fall was averted on Friday when after an initial plunge of 166 points, the Index rebounded in the second half of the trading session to finish with a three-digit gain of 105 points. The stock market witnessed a turnaround after a major political party, which had announced only a day ago, its intent to participate in the ‘long march’, distanced itself from the event.

The news flowing in just before the start of the second session on Friday proved sentiment booster as the investors thought that it might take the wind out of the sails of the threatened ‘long march’.

The market mover was politics and not economics. Yet some headlines made slight impact on the market. Furqan Ayub, analyst at brokerage JS Global pointed out that on the macro front, it was noted that the foreign exchange reserves stood down by $249.3 million to $13.56 billion, while remittances surged by 12.51 per cent in the first half of financial year 2013 over the same time last year.

Other key highlights included release of cement and auto sales numbers for December 2012 and issuance of NoC by the SBP to Fauji Foundation for the acquisition of Askari Bank.

Regarding the foreign portfolio investment in equities, analysts at brokerage JS Global suggested that foreigners were ‘lured by cheap valuations’ and bought equity worth $8.5 million during the week. The ‘blue chip’ scrips off-loaded by the local institutional investors were quickly absorbed by the foreign portfolio managers.

The foreign buy compared favourably with the net sale of $2 million worth shares the earlier week.

The market capitalisation of KSE witnessed nominal decline by Rs5 billion to Rs4.168 trillion, from Rs4.173 trillion at the end of the previous week. In dollar terms, market capitalisation was down by 0.6 per cent to $42.73 billion, from $43.01 billion.

Some nervous investors spooked by the political happenings and the law and order  situation, decided to take profit during the week while most of the market players remained on the sidelines. The average daily volumes, therefore, tumbled by 35.3 per cent to 95.79 million shares, from average daily turnover of 148.13 million shares in the past week. Average daily value declined by 17.5 per cent to Rs2.81 billion, from Rs3.41 billion in the previous week.

Stocks that posted big gains during the week included those of Askari Bank, United Bank, Honda Cars, Fauji Cement, Bank Al-Falah, Lucky Cement, Kot Addu Power, Oil & Gas Development Company, Pak Suzuki Motor Company, Hub Power Company and National Bank of Pakistan.

The scrips that saw big erosion in values included: Engro Corporation; Pakistan Telecommunication, Grays of Cambridge, J.D.W Sugar, Abbott Laboratories, Attock Cement and National Foods.

Volume leaders during the week were: Maple Leaf Cement, Fauji Cement Company, Jahangir Siddiqui & Co, Askari Bank, Pakistan Telecommunication and Fauji  Fertiliser Bin Qasim.

Equity dealer, Samar Iqbal at brokerage Topline Securities pointed out that Askari Bank remained in the limelight during the week as the change in management attracted investors’ interest to the scrip.

Fauji Fertiliser Bin Qasim also remained active after announcing better than expected payout and earnings for full financial year 2012.

Future Outlook: Political noise is expected to grow louder in the coming week, due to the ‘long march’ and its implications not clear yet. Also clarity on new bailout package from IMF and the upcoming corporate results would be closely watched by the investors. “Any announcement pertaining to the caretaker government and election dates could be the game changer”, say analysts at KASB Securities.

They recommended keeping a close eye on the corporate results as the market moves would be determined by earnings growth and company cash payouts.

AKD Equity Research team stated that current trend could continue next week when the market was likely to remain patchy as investors eye the outcome of the threatened ‘long march’ on Jan 14, Monday (the first trading day next week). Most market participants believed that the next trigger for the market would be the commencement of the result season, when corporates would come up with the financial figures and payout for the second quarter financial year 2013 (Oct-Dec 2012).—Dilawar Hussain