Equities bounce back

The Karachi share market rebounded, during the last week, on optimism regarding the solution to the political impasse and the benchmark KSE-100 index gained some 946 points Weak on Weak (WoW) to reach at 29,514 points at the end of the week compared to 28,568 points a week earlier.
Analysts said that although political uncertainty is prevailing since the beginning of the PAT and PTI sit-ins in Islamabad, however now it is being felt that these sit-ins are not a major threat for the N-league government and ongoing dialogues among the parties will be fruitful. Therefore, the market bounced back in the last week, rising the KSE-100 index 3.3 per cent WoW to close at 29,514.
During the last week, an average traded volume rose 48 per cent WoW to 176.21 million per day as against 119 million per day during the previous week. Foreigners were major buyers during the week as Foreign Portfolio Investment rose by a staggering 121 per cent WoW to $18.65 million.
WoW basis, the market capitalisation posted an increase of Rs 215 billion to reach Rs 6.942 trillion as on September 5, 2014 compared to Rs 6.727 trillion a week earlier. With an increase of 48 per cent average daily value during surged to Rs 9.38 billion up end of the week.
"Pressure on the ruling party appears to have subsided for now and the market sentiments turned positive this week, triggered by the army's statement denying claims that they were backing the protests," said an analyst at KASB.
Imran Khan's party PTI was badly affected by Javed Hashmi's resignation and the subsequent reduction in the number of protestors. Furthermore, a joint session of the parliament also helped in strengthening the support for the ruling party, he added.
Cement sector was upbeat after a strong result and payout from Lucky Cement. Pak rupee volatility (down 3.5 per cent QoQ against the dollar) kept investors tilted towards the IPPs and textile stocks. The PSO posted less than expected result as their earnings was eroded by hefty inventory losses, the analyst said.
On Friday, however, rumours of cancellation of Chinese Premier's visit to Pakistan and Moody's comment on Pakistan's current political turmoil further pressurised the market, he pointed out.
On the economic front, inflation fell to a 14 month low of 6.99 per cent vs 7.88 per cent YoY last month, led by benign food inflation (4.7 per cent YoY).
Talking about the market outlook, he said that politics would continue to dominate the market with ongoing talks between the government and the PAT/PTI leadership assuming added importance.
With result season almost drawing to an end, the settlement of political deadlock remains a key visible trigger in near term, he added.
"Pressure on the two parties for an early resolution of an issue has increased after three weeks of political deadlock, slowdown in economic activities and human and economic losses due to heavy rain in several cities of Pakistan," the analyst said.
According to Raheel Ashraf of the JS Global, during the last week the market bounced back as investors hinged their hopes on a peaceful breakthrough in the current political impasse.
Moreover, lower-than-expected CPI inflation reading of 7.0 per cent YoY for August 2014 raised hopes for a potential cut in the Discount Rate in the Monetary Policy Statement due in mid-September 2014, he added.
He said that strong corporate announcements also kept investor interest intact with average daily volumes rising by 48 per cent. The major chunk of the interest was witnessed in cement, textile, and telecom sectors.
Petroleum product prices being cut by 0.1- 1.3 per cent, budget deficit clocking in at 5.5 per cent for FY14, investment in National Savings dropping by 34 per cent YoY to Rs21 billion in July 2014 and cotton arrivals reaching 1.76 million bales in YTD FY15 up by 2.11 per cent YoY, were other key highlights of the week, he informed.