The Karachi share market last week ended on June 22 took a downturn due to further delay in PSO privatisation, the alleged fraud in the Bank of Punjab and continuing uncertainty on political front.
Although the fundamentals were strong and inflows of foreign investment kept increasing, with its highest level of $924 million, out of which $169.277 million came only in the month of June 2007, the local bourse index declined by 0.3 percent in the week.
The KSE-100 index witnessed a correction of 46 points through the week, finally settling at 13,392.47 points level. The KSE-30 index also lost 53.18 points to close at 16,699.47 points level.
The market witnessed dull trading as the average daily volume of ready market declined to 317.912 million shares as compared to 350.67 million shares traded during a week earlier. The average daily turnover of futures market however slightly increased to 62.171 million shares against 60.5 million shares changed hands previously.
The start of the market was positive and the KSE-100 index crossed 13,500 points level on the back of fresh buying mainly in banking and oil sectors by both local and foreign investors on Monday. Finally the index closed at its new high level of 13,567.40 points, with a net gain of 128.93 points. On Tuesday, the market witnessed technical correction and the index closed at 13,494.83 points, down by 72.57 points.
On Wednesday, fresh buying by foreign investors was witnessed mainly in banking sector and the index managed to recover 61.90 points to close at 13,556.73 points.
On Thursday, due to delay in PSO's privatisation and an alleged fraud in BoP created uncertainty among the investors and invited selling in various stocks. However, late buying in cement sector supported the index to recover its losses, finally closing at 13,545.80 points level with a marginal loss of 10.93 points.
On Friday, the market witnessed a bearish session and the market players opted to offload their holdings on available margins due to uncertainty on political front after a reference against the Prime Minister was filed by opposition.
A couple of negative news created panic selling and at one time the KSE-100 index had reached 13,248.79 points intra-day low. However, fresh institutional buying at low levels, especially in cement stocks, was witnessed which supported the index to recover some of its loses. Finally the index close at 13,392.47 points with a net loss of 153.33 points.
Khurram Schehzad, analyst at Invest Capital & Securities, said that after setting records, the buying euphoria at KSE-100 index has calmed down gradually with the melting excitement of the participants, due to deteriorating political situation and a few negative developments on local corporate front.
Synthetic & Rayon topped the top-3 star performing sectors list with an increase of 11.5 percent on week-on-week basis. This was followed by Leather & Tenneries and Cement sectors documenting increase of 7.7 percent and 6.4 percent respectively. Conversely, Refineries topped the top-3 losers category with 8.1 percent decline followed by Closed-End Mutual Funds and Chemicals with decrease of 3.9 percent and 2.8 percent respectively.
Most of the blue chip sectors like Banking, E&P, OMC and Fertiliser also showed a negative change of 0.6 percent, 1.9 percent, 0.8 percent and 0.4 percent respectively on week-on-week basis. The week started off on a very positive note, mainly on account of positive news of one-year delay in the application of capital gains tax on banks, Farhan Aziz, an analyst at JS Global Capital Limited said.
However, negative news about poor lending systems of BoP dampened investors' sentiments in the banks in the last two sessions. On Friday, these negative sentiments spread across the board. As a result, banking sector eroded 0.6 percent of its market cap during the week. Likewise, another index heavyweight E&P sector remained under pressure. It lost weight by 1.9 percent.
The disappointing performance of banks and E&P had 86 points negative contribution to index during the week. The cement sector was under limelight during the week. Cement sector stocks appreciated in anticipation of better earnings in coming years, on the back of better export prospects for Pakistan cement producers due to the cement shortage in the region. Cement sector gained hefty 6.4 percent over the week.
Jawad Haleem, head of research at Atlas Capital Markets was of the view that deferment of various taxes levied on banks' income to tax year 2009, discovery of gas by ENI in which PPL has a 30 percent holding, sell off of Aljazira shares by NBP at market price and removal of rebate facility from Chinese government on their exporters were some positive news which invited fresh buying and supported the index to go up at higher levels. On the other hand, the negatives were postponement of PSO's privatisation, confusing notices and rumours regarding an alleged fraud of Rs 6 to 8 billion in BoP and abolition on various duties on oil products were some negative news which invited selling at the market.
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