Record-breaking trend continues

With benchmark index peaking beyond the psychological barrier of 35,000 points in the Wednesday's session, the Karachi stocks market grew by 0.62 per cent during the week that ended on February 6. Sustaining its record-breaking bullish momentum, the KSE 100-share index opened with a positive note to finally close at 34,657 points on Friday, last trading day of the week.
The week's daily traded volume averaged on 328 million shares, showing 10 per cent week-on-week (WoW) increase over the previous 239.70 million. The net foreign outflow accounted for $51.54 million compared to last week's $3.33 million net inflows.
Raheel Ashraf of the JS Research attributes the index's gain to soft CPI numbers (3.88 per cent Year-on-Year) that, the analyst said, fuelled investors' hopes of further rate-cut by the State Bank.
"Profit-taking at these levels led the KSE-100 to close at 34,657 points," he said.
Other positives for the volatile market were Pakistan's successful completion of the IMF's sixth review for the release of $518 million and 1.5 per cent rate-cut in national savings.
"Sharp pull-back in international crude oil prices helped oil and gas sector to gain 3.4 per cent, WoW, whereas telecom and pharmaceutical sectors underperformed the market," said Ashraf.
Other key highlights of the week citied by the analyst were T-bills cut-off yields declining by 47-53bps, the government likely to announce the textile policy within next two weeks, up-front tariff for LNG-fired power plants likely to be set at Rs8.55 per kilowatt hour and K-Electric's (KEL) owners divesting four per cent or 774.6 million shares in KEL to raise free float.
Equity analyst Abdul Azeem said the session began with an encouraging lower than expected inflation figure of 3.88 per cent, lowest since FY2008.
The international oil prices also recovered steeply in the beginning of the week but booked the same momentum losses in the later part of the week. The KSE was no exception as the stocks of oil companies recovered world-wide, said Azeem.
Crossing 35,000 points level on Wednesday, the index showed some volatility, especially on Friday. "The dismal corporate earnings in oil sectors amid led to pressure building on the index," said the analyst.
He said the pressure on the index became further intense amid sharp decline in oil prices in the later part of the week exerted downward pressure on the index.
Further, Azeem said, the closure of market on Thursday, a public holiday, affected the volumes and foreign inflows adversely.
Going forward, the analysts expect the bourse to remain optimistic with investors' eyes to remain stuck on the release of $518m IMF tranche that would support the country's floundering economy.
Also, equity holders would stay cautious ahead of corporate earnings announcements this week, especially by EFERT, PRL, ABL, CHCC, LOTCHEM and AKBL. "In our view, the international oil prices would remain volatile and range bound for foreseeable future, this would also impact the stock prices of oil companies and eventually the index," said analyst Azeem.