IN the closing week of financial year 2011-12, investors in stocks did not show much enthusiasm. The KSE-100 index ended the week at 13,801 points, with a minor gain of 70 points or 0.5 per cent over the earlier week’s closing at 13,731 points.
It marked the second consecutive week of dull activity as the shares had posted modest gain of 65 points or 0.6 per cent in the week before last.
Average daily volumes at a low of only 69 million shares mirrored the lack of investor interest in equity trading. “Normally, institutional investors are seen to be active in the week before the close of the year to balance portfolio,” said a stock broker. Foreigners, who have been on a selling spree for a while now, offloaded equity worth$5.6 million during the outgoing week.
Equity dealers said slow yet consistent outflow of foreign funds from stocks triggered larger sell-off from nervous retail investors. However, institutional and long-term high-net worth individuals continued to accumulate good dividend yield stocks. A stock broker asserted that foreign sell-off was not Pakistan specific, but seen in most emerging and frontier markets. The continuing worries over the eurozone’s financial situation were compelling foreign fund managers to offload stocks and move closer to home.
Besides, there was not much that could hold back foreigners’ stake in Pakistan capital market. The Rupee erosion, accompanied by lack of visible progress on Pakistan-US dialogue over the opening of NATO supply route to Afghanistan, seemed to dampen sentiments.
A market participant pointed out that money goes where there is safety of capital and hopes of healthy return. For the financial year 2012 that closed on Friday, the benchmark KSE-100 posted gain of 10 per cent, which the head of brokerage Top line Securities, Mohammad Sohail, termed as ‘good for nothing’.
Stock strategists at a major brokerage house said that in the fag end of the financial year, equity investors’ immediate concerns on the Finance Bill 2012 were partially addressed as a Presidential Ordinance was promulgated last weekend, validating the measures undertaken by former prime minister during the span of April 26 (the date of his disqualification) and June 19 (date of the court verdict). However, the legality of the ordinance was challenged in the Supreme Court. All of that left a thick layer of uncertainty in the air and a high net-worth investor quipped: “As uncertainty is worse than bad news, most investors appear to have decided to wait till the dust settles”.
Drilling down to stock specifics, Pakistan Petroleum Limited (PPL) emerged as the preferred bidder for acquisition of foreign oil & gas exploration company MND’s Pakistan’s assets. Fertiliser sales in May were down by 20 per cent over the same month last year, but the figures posted their best showing year-to-date for local producers.
Naveed Tehsin, analyst at the brokerage house JS Global, said the market continued with subdued activity amid political turbulence in the outgoing week. Other major highlights included: Competition Commission of Pakistan (CCP) issuing show-cause notices to fertiliser companies, PSO starting additional supply of furnace oil to generate 1200MW of power and Indus Motor and Honda raising car prices to compensate for Euro II compliance.
In terms of effect on share prices, the key fertiliser stocks namely FFC, FFBL, ENGRO and FATIMA all underperformed the market by 1.4 per cent, 1.0 per cent, 3.0 per cent and 0.5 per cent respectively on week-on-week basis. However, Indus Motors and Honda Cars underperformed the market by 2.9 per cent and 6.4 per cent, respectively.
Going forward, the corporate results for the quarter ended June 30, would be forthcoming by the middle of July, which could act as a catalyst for the stock market. Analysts reckoned that institutional investors may continue accumulation of fundamentally strong stocks such as PPL, APL, PSO, OGDC, POL, Hubco and NCPL in the energy sector, and MCB among banks. —Dilawar Hussain