Bullish sentiments prevailed at the Karachi Stock Exchange during the last week following a peaceful political gathering in Islamabad at the weekend and lower CPI inflation.
Week on Week basis, the benchmark KSE-100 index gained some 951 points to reach at 32,149 point highest level at the end of the last week compared to 31,198 points a week earlier. The market capitalisation surged by Rs 204 billion (WoW) to Rs 7.356 trillion up from Rs 7.152 trillion.
"The market opened week on a positive streak and investors remained bullish throughout the week and the stock market also reached at 32,315.56 points in intraday trading on Friday," said Abdul Azeem, an analysts at InvestCap.
The market participants were reluctant to take new positions a week earlier mainly due to a protest staged by the PTI last Sunday (30th Nov) in Islamabad, however investors were relieved as the protest concluded peacefully and investors remained optimistic even though the PTI has called for shutdown of some selected cities, he added.
Azeem said that an important occurrence in the beginning of the week was announcement of CPI figure for Nov''14. In line with falling oil and food items prices, the CPI ticked at 3.96 per cent, which was its lowest level in eleven years. The falling inflation provides a cushion to the SBP for cut in the interest rate.
"We anticipate a further cut in policy rate, which will prove to be a positive development for leveraged companies and business community in general. Initially, the index faced a strong downward pressure from heavy weighing oil sector companies; however, the pressure cooled down during the week and oil sector rebounded as oil prices in the global market lost its downward trending momentum," he added.
The investors'' confidence was portrayed in the average daily traded volumes this week. The average daily traded volumes were 350 million shares as compared to 209 shares last week, surged by 67.5 per cent WoW. The net foreign outflows were $1.76 million as compared to $4.47 million net outflow last week.
Talking about the outlook, Azeem said that the low CPI figure has paved the way for a further discount rate cut and the expected cut in discount rate will help to boost the bottom-line of the leveraged companies and will hoist the recuperating economy.
In addition, the low oil prices globally have a positive effect for economy of Pakistan, as oil bill being a gargantuan portion of import bill, will be a relief for the BoP.
Raheel Ashraf, an analyst at JS, said that November 2014 CPI inflation came in at an 11-year low, fuelling speculation of a discount rate cut in the next Monetary Policy Statement (MPS) in January 2015. Hence, the benchmark KSE-100 gain 3 per cent WoW to close at 32,149, with average trading volumes rising by 67 percent WoW.
He said that uncertain oil price outlook kept heavy-weight oil stocks under pressure, however power sector gained over expectations of lower circular debt accumulation amid lower oil prices and cut in interest rates.
K-Electric, Pakistan''s only integrated power utility, gained 9 per cent WoW. While, other key highlights of the week were: (1) US extending Coalition Support Fund (CSF) for Pakistan for another year, (2) Petroleum product prices cut by Rs4.34-10.61/litre, (3) Tax collection in 4MFY15 rising by 14% YoY to Rs900bn, (4) IPPs contemplating on invoking sovereign guarantees as their receivables pile up and (5) SECP lifting ban on KASB securities trading activities, he mentioned.
It may be mentioned here that according to the last month data, the KSE was ranked second best performing market in Asia and has recorded a handsome growth of 5,937 points or 23.5 per cent CYTD. This kind of sturdy returns alleviated the local investor sentiments. During the week, the SECP directed the KSE to reinstate the trading activities of major brokerage house, whose trading activities were suspended. The restoration of brokerage house trading was also seen as an efficacious upshot.