Healthy earning reports from some of the blue chips and investment stocks helped share market to recover most of the losses during the last week as sentiment slowly and steadily improving following active support from some of the leading financial institutions.
Financial results from PTCL, Faysal Bank, Soneri Bank, D.G. Khan Cement, OGDC, Sui Northern Gas, Sui Southern and companies from banks, cement, textile and other sectors helped market to recover from larger declares.
During the outgoing week, the KSE-100 Index managed to close down only marginally despite a huge 112-point erosion on the first day of the week (February 23).
The Index closed the week at a level of 4840, which is only a 28-point or 0.6 percent decline as compared to the previous weekend. Investors remained focused on high-profile corporate announcements, which were aplenty during the last week.
Badla statistics also remained relatively subdued, as both badla investment and badla rates witnessed declines on a weekend-to-weekend basis.
The local badla market will continue to witness stability in rates, with no major fluctuations.
The amount of liquidity in the inter-bank money market going forward is likely to play a key role in determining the level of badla rates, as investors continue to watch for more corporate announcements.
The week started off on a negative note with the market dropping 113 points, or 2.33 percent, by the end of Monday's trading session.
The sell-off was triggered primarily by the announcement of below market expectation results by Pakistan Oil Fields.
It is interesting to note that Pakistan Oil Fields instigated the last market correction as well and that there were fears after Monday's session that a repeat performance was about to occur.
However, the doubts proved to be unfounded with the market recovering some of the losses on Tuesday on the back of a rumour regarding an agreement between Lucky Cement and the cement cartel.
The remaining week continued the positive trend, primarily fuelled by the announcement of strong results by companies such as PTCL, which met or beat market expectations.
Next week will witness fewer trading sessions than normal due to the Ashura holidays, these sessions have the potential to deliver a strong punch. Hubco is expected to announce it's interim dividend on the fourth of March.
While analysts were previously expecting a dividend in the range of Rs 2-2.1 per share, our calculations show that it is likely to be significantly lower than this number.
This could have serious repercussions for Hubco's price. Given the position of Hubco as a key blue chip, any sizeable fall in the stock price can in turn have an adverse impact on the whole market, an analyst from KASB Equities said.
The KSE-100 index will also be recomposed this month. The re-composition will be in line with the policy of the KSE where the index is recomposed quarterly.
OGDCL is likely to be included in the index during this process.
Although the inclusion of any new company in the index requires that the company have a 6-month trading history at the KSE, it is likely that OGDCL will be treated as a special case since it will provide a significant boost to the KSE-100's market capitalisation.
Although this is an important development, it will not have an immediate impact on the level of the index.
Hub Power during the week received heavy battering as some of the punters feared that the company would not have the ready cash to pay a dividend higher than Rs 1.4-1.5 per share.
First it was Pakistan Oilfields, which turned the market sentiment negative with its no interim dividend announcement and now it appears that Hubco is doing the same.
However, not so long ago the stock was trading at Rs 40, and traders and dealers recommend accumulating the stock at lower levels as they felt that its a good buy at around Rs 35-36 levels even with a reduced dividend pay out.
PSO during the last two trading sessions of the week showed a considerable strength.
There are rumours that larger players are accumulating the stock and people are expecting (or is it hoping?) that the stock will move back up to trade above Rs 300 levels.
However, we caution risk-averse players to stay away from the stock, as it will remain volatile. And please remember to maintain strict stop losses while trading in this market, said a trader from Elixir Securities.
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