The Karachi stock market witnessed a turnaround in the week to Thursday, when stocks resumed the climb after two earlier weeks of sluggish performance.
As the bulls drove away the bears, the KSE-100 index recovered 249 points or 1.4 per cent during the week, from the combined loss of 520 points in the preceding two weeks.
The week began on a dull note with the index losing 173 points on Monday. Although the grim possibilities of sanctions by the US in the face of Pakistan’s will to proceed with the IP Gas Pipeline were pushed on the back burner, the Karachi bourse plunged in sync with international markets, which went into tailspin, over fears that the attempt by Cyprus to put levy on bank deposits could trigger another global economic crisis. For all of the remaining week, investors’ kept close watch on the developments on the political front, where most analysts said investors expected a smooth transition of power to the caretaker set-up.
With just two competitors left for the post of interim prime minister, the market was looking forward to an investment friendly interim government, giving comfort to investors to pick up equities of high-growth companies, which had declined to attractive levels.
The heavy-weight stock of Oil and Gas Development Company (OGDC) proved to be an anchor in the week with substantial increase in price. Due to OGDC’s heavy weightage in the index, it contributed to more than a quarter to KSE-100 index rise during the week.
Apart from the sustained foreign investors’ interest in the oil & gas exploration giant, OGDC also benefitted from positive developments such as addition of 35 million cubic feet (mmcfd) gas per day into the system from Qadirpur Gas Field.
Engro was another big gainer during the week with investors expecting its gas supply and pricing problems to ease going forward. Cement stocks also surged as sales are expected to reach 33.6m tonnes in FY13 despite slowdown in exports, industry watchers said.
According to statistics, sector’s capacity utilisation in 1HFY13 stood at 71 per cent against 69 per cent in the same period last year.
The growth was expected to reflect in the next quarter results of most cement companies.
The news flow during the week was mixed: Budget deficit widened to Rs960 billion or 4.1 per cent of GDP; the Planning Commission has so far released Rs140.2 billion under its Public Sector Development Programme (PSDP) against the total allocations of Rs233 billion for the fiscal year 2012-13; Power sector losses surged to Rs450bn; the gas utility, SNGPL was seeking Rs54 per unit hike in gas prices and net foreign direct investment into Pakistan in the eight months ended February declined 9.7 per cent from a year earlier to $504.4 million, according to central bank data.
Foreigners’ portfolio inflow during the week stood at $7.58 million until Thursday. This compared with purchase of equities by foreign investors worth $4 million for five days of the earlier week.
The market capitalisation saw an addition of Rs 18 billion to Rs 4.381 trillion during the week, from Rs4.364 trillion at the end of trading the earlier week.
Average daily volume of shares worked out at 192 million shares for the four day’s till Thursday, compared with average daily turnover of 174 million shares the week earlier.
The top gainers during the week included: Philip Morris, Lucky Cement, OGDC, Rafhan Maize, National Foods, Engro Corporation, Bhanero Textile Mills, Adamjee Insurance and Sapphire Textile.
The biggest losses were recorded by Colgate-Palmolive, Indus Dyeing, Shezan International, Pak Suzuki Motor Company, National Foods and PIA.
The volume leaders included Engro Corporation, Lotte PakPTA, Lafarge Pakistan, TRG Pakistan and D.G.Khan Cement.
Financial results: Pak Suzuki Motor Company unveiled results on Thursday, posting profit after tax (PAT) at Rs 978m or Earning per share (eps) at Rs11.89 up 23 per cent over PAT at Rs794m and eps at Rs 9.65 the earlier year.
The board declared final cash dividend at Rs2.50 per share.
Future Outlook: Going forward, investors are likely to focus their attention on the care-taker set up and the events leading upto the May 11 elections.
“A smooth political transition will win many brownie points with the foreign investing community and improve the country risk perception in a market which still trades at an attractive price-to-earnings (p/e) discount of over 40 per cent to regional markets”, say analysts at Arif Habib Securities.
Other analysts pointed out that on fundamentals, the Pakistani equity market looks attractive with a high dividend yield of 6.8 per cent and low price-to-earnings (p/e) ratio at 7.2 times.
The KSE has recorded gains of six per cent year-to-date. The Mumbai’s BSE-30 has been down this year by 3.3 per cent and US Dow Jones up by 10.1 per cent. Yet the dividend yield of Mumbai stocks was low at 1.7 per cent and Dow Jones at 2.6 per cent.
Both were trading at respectively high p/e at 14.6 and 12.9 times.— Dilawar Hussain