Stocks continued to climb at the Karachi share market with the benchmark KSE-100 index demolishing yet another psychological barrier of 18,000 points to close at 18,074 points on Friday.

It represented hefty gains of 277 points or 1.6 per cent from the index closing at 17,797 at the end of trading the earlier week. The Pakistani equity markets have already gained 6.91 per cent in less than two months of the current calendar year.

A bevy of healthy corporate results and payouts buoyed investor sentiments, though law and order situation was of slight concern.  Local individual and institutional investors, however, continued to accumulate value stocks. Foreign inflows in the Pakistani equity market accelerated the bullish fervour.

During the week, foreign funds managers were net buyers of $11.6 million worth equities, seven per cent more than sum of $10.8 million worth net purchases the previous week.

At the start of the week, the market presented slightly gloomy picture on account of  law and order situation in Quetta. Yet, the bulls regained momentum by mid-week as investors’ focus quickly shifted to strong corporate results and payouts. The major developments during the week having impact on equity market included proposal to increase margins of oil marketing companies; positive development on gas supply issue being faced by fertiliser companies where the Gas Sale Agreement (GSA) on the Kunnar Pasaki Deep (KPD) field was entered into between fertiliser companies and Oil and Gas Development Company (OGDC) and the Supreme Court overruling the Lahore High Court’s decision of suspending the ICH hearing on telecoms.

All of that triggered momentum in respective sectors. On the political front, MQM parted ways with the ruling coalition, which the market took in stride. During the week, Dr Hafeez Sheikh stepped down from the post of finance minister, possibly to stand as candidate for nomination as the caretaker prime minister.

The market capitalisation of KSE rose by Rs31 billion to Rs4.492 trillion on Friday, from Rs4.461 trillion at the end of the previous week.

Daily average trading volumes during the week increased by 14.2 per cent to 308.7 million shares, from 270million shares traded the previous week.

Average daily traded value also rose by 24.5 per cent to Rs8.47 billion, from Rs6.81 billionthe earlier week.  The leading gainers during the week included Murree Brewery, Engro Corporation, Packages Limited, Dawood Hercules, Nishat (Chunian), Honda Cars, PTCL, D.G. Khan Cement and MCB Bank.

The laggards for the week were Sui Southern Gas; Sui Northern Gas; National Foods; Pakistan Tobacco Company and Agriauto Industries.

Stocks that posted the highest volume during the week were: Jahangir Siddiqui & Co, Fauji Cement, Pace (Pak) Limited, NIB Bank and the three telecom scrips.

From the investors’ point of view, key corporate result announcements during the week were unveiled by the following: Kot Addu Power Co, posting earning per share (eps) at Rs4.18 for the first half financial year 2013 (1HFY13), representing improvement of 36 per cent over the same time last year (YoY). The company paid dividend at Rs3 per share; OGDC declared eps at Rs 11.45 for 1HFY13, up by 18 per cent YoY, with the directors announcing dividend at Rs2 per share.

PSO for the half year announced eps at Rs 30.48, up by 37 per cent YoY, with cash dividend declared at Rs2.50 per share along with bonus issue at 20 per cent. Indus Motors unveiled eps at Rs12.44 for half year, showing drop of 45 per cent YoY; the board declared cash dividend at Rs6 per share and Nishat Mills reported first half eps at Rs8.13, an increase of 50 per cent YoY, but without a payout.

Future Outlook: Financial results and payouts by the banking sector would be the significant events in the week ahead.

Earnings and dividends announcements by the National Bank of Pakistan and United Bank Limited would take the lead. ‘”However with the market straying into uncharted territory, volatility may spike further” analysts at KASB said.  With little over three weeks to mark the end of government’s tenure, developments over caretaker setup and timing of general elections in the country would also gain traction.

In the week ended last Friday, the market generally shrugged off law and order concerns and declining foreign exchange reserves in the face of IMF repayments. “Corporate results and attractive valuations of single digit forward multiples (7.9 times) were clearly keeping the market buoyant”, say analysts at AKD Securities.

The upcoming result announcements include those of UBL, Nishat (Chunian), NBP and Hub Power Company. In the near-term, the corporate results were likely to drive the market.

Yet difficult issues would soon come to the fore, where political and macro indicators could be a drag on the market, regardless of strong earnings and attractive stock valuations. — Dilawar Hussain

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