THE Karachi stock market remained volatile throughout the past week with stock prices moving in sympathy with the news flow.
The net result was a modest gain in benchmark KSE-100 index by 22 points or 0.2 per cent over the earlier week. The index settled at 14,332 points at the close of trading on Friday.
Average daily volumes stood at 95 million shares, depicting nominal improvement of three per cent over the previous week.
Foreign investors remained net buyers during the week with the market witnessing net inflow of $5.2 million, compared to net purchases of $9.39 million worth stocks by the foreign investors, the previous week.
During the week, market activity was dominated by stocks in D.G. Khan Cement, Engro Foods, Jah.Sidd.Co and Azgard Nine. Top gainers included Honda Cars, up by 9.54 per cent over previous week; the stock climbing on expectation of strong results following the release of auto sale numbers where sales were up by 3.6 times over the previous quarter. Askari Commercial Bank rose by 5.62 per cent and Pak Suzuki Motor was up by 4.47 per cent on forecasts of healthy profits. Among major losers during the week was Fauji Fertilizer Bin Qasim down by 7.96 per cent as the company declared nil dividend in the second-quarter 2012 results. UniLever fell 2.47 per cent and Engro Corporation lost 2.42 per cent of the value, during the week.
On Friday, the last day of the week, stocks came under severe pressure after Moody’s Investors Service downgraded Pakistan’s foreign and local currency bond ratings to Caa1 from B3. The country’s external payment position, weak government finances, structural inflationary pressures and domestic political turmoil were cited the major reasons for the downgrade.
Numbers released during the week presented a mixed picture of the economy. Trade deficit surged by 36 per cent over the earlier year to $21.3 billion in FY12. Higher international oil prices augmented the import bill as imports rose by 11.1 per cent over the previous year to $44.9 billion, while exports declined by 4.7 per cent to $23.6 billion.
“Energy shortage coupled with lower cotton prices kept the overall exports relatively constrained,” says Furqan Ayub at JS Global.
Remittances, on the other hand, increased to $13.2 billion in FY12 against $11.2 billion recorded last year. In June 2012, remittances amounted to $1.1 billion, up by one per cent over the same month last year.
Samar Iqbal, equity dealer at the Topline Securities, said the key highlights during the outgoing week remained Supreme Court hearing on contempt of court case. Moody’s downgrade of government bond ratings dented investors’ sentiments which overshadowed positive outcome of a meeting between the apex regulator Securities and Exchange Commission of Pakistan and the KSE held on Thursday.
Analysts at the KASB Securities said that things appeared to be heading into Round II of the tussle between the government and the judiciary as the July 12 NRO hearing saw the bench give a two-week timeframe to the new prime minister to write a letter to the Swiss authorities while on the other side parliamentary proceedings progressed at breakneck speed as the government swiftly passed the new Contempt of Court Bill through the Houses, although the same has been challenged in the court. Moody’s downgrade was thought to have come at a peculiar time given that the external account situation had started to show signs of improvement.
Going forward, analysts at the AKD Securities believed that following Moody’s downgrade of Pakistan’s sovereign credit rating, investors’ sentiment particularly that of foreigner players may be dampened next week.
Moreover, US Senator Rand Paul’s claim to get necessary number of signatures to cut Pakistan’s aid in case of rejection of Dr Shakil Afridi’s appeal in the Supreme Court poses another downside risk.
On the local front, the detail of trade export numbers is expected to be announced next week where textile exports data may trigger investors’ interest in major textile shares. And finally, the result season will enter into full swing from next week where key results to be unveiled include those of Engro Foods, Hub Power Company, UBL and Lucky Cement. —Dilawar Hussain