Weekly Review: As the shock of monetary policy sinks in, bulls resume control at Karachi Stock Exchange

Led by the banking sector, the index closes 1.8% up at 23,595.61 points.

Led by the banking sector, the index closes 1.8% up at 23,595.61 points.

THE EXPRESS TRIBUNE, KARACHI, 23rd SEPTEMBER 2013: 

Beating all expectations, the market closed the week on a strong note despite the surprise increase in the interest rate by the State Bank of Pakistan in the monetary policy announcement last Friday. The banking sector remained in the limelight, leading the charge on optimism of future earnings as pressure on spreads will ease off in the future.

The banking sector’s strong performance, coupled with strong foreign inflows, led to a 1.8% gain over the previous week, closing at 23,595.61 points. In terms of activity, however, the week was lacklustre where the average daily turnover rose to 244 million shares, up a mere 2%, while value of shares traded clocked in at $78.1 million, 9% lower than the previous week.

In the aftermath of the central bank’s unexpected 50 basis points interest rate hike, the index started the week on a soft note, losing 1% in the first three trading sessions of the week. However, rebound of the banking sector, support from foreign inflows and greater comfort in future foreign inflows post-Federal Reserve Bank’s decision not to cut stimulus plan, lent strong support to the market in the week, said JS Global Capital analyst Farrah Marwat.

The week saw a revival of foreign investors portfolio investment with net inflow clocking in at $6.8 million.

On the macroeconomic front, Pakistan investment bonds and treasury bills yields increased 40-50 basis points following the hike in interest rates, while the current account deficit for August clocked in at $575 million and rupee continued to remain under pressure, depreciating 0.6% against the greenback during the week.

On the flipside, the energy sector had a weak run this week. Energy and oil stocks were under pressure as receding Syria-risk added some stability in international oil prices while the oil marketing companies and independent power producers felt the heat due to resurfacing of the circular issue. According to media reports, the circular debt has risen to Rs165 billion in just two months after the government settled the issue partially.

The cement sector was also tepid, despite strong earnings announcement in the week by Lucky Cement, Kohat Cement and Pioneer Cement. The sector underperformed the KSE-100 index by 2.9% as investors lent more credence to interest rate hike dampening sector’s earnings in the future rather than the news that the All Pakistan Cement Manufacturers Association has, apparently, resolved its internal tussle on cement prices and market share.

Outlook

Whilst rising interest rate outlook bodes well for the banking sector’s profitability, KASB Securities believe it will create pressure on the valuations for the rest of the market. Moreover, the brokerage house advises investors to keep a close eye on implementation of much-touted reforms agenda of the incumbent government.

Winners

Shifa International Hospitals

Shifa International Hospitals Limited establishes and runs medical centres and hospitals in Pakistan. The company’s clinical services include medicine, paediatrics, surgical, obstetric and gynaecology, dentistry, rehabilitation services and ophthalmology. Shifa also provides diagnostic services including specialised diagnostics, radiology and clinical laboratory.

Soneri Bank

Soneri Bank Limited provides banking services.

Bank AlHabib

Bank Al Habib Limited operates commercial banks in Pakistan.

Losers

Mari Petroleum

Mari Petroleum Limited specialises in the drilling, production and selling of natural gas.

Jahangir Siddiqui and Company

Jahangir Siddiqui and Company is an investment company offering share brokerage, money market, advisory and consultancy, underwriting and portfolio management services.

Thal Limited

Thal Limited manufactures jute goods. The company also undertakes engineering projects.

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