Equities remain positive

15 Jun, 2015

Shrugging the budget related negatives off, the Karachi bourse ended the week on a positive note to close at 34,657 points, a four-month high. The KSE-100 index gained 1.9 percent, week-on-week (WoW) with daily trading turnover averaging on 400 million shares, up 27 percent. The average daily shares traded appreciated in prices by 34 percent to Rs 17.4 billion or $170.3 million. The week under review saw sectors like chemical, media, engineering and cement registering major gains of 7.2, 6.5, 5.5 and 5.2 percent respectively.
Adversely impacted by monetary and budgetary developments, the commercial banks borne what analysts at Topline Research said a major fall of 4.5 percent. The foreigners bought net portfolios worth $13.8 million while the local mutual funds' net buying accumulated to $9.3 million. The domestic banks kept their selling spree to offload positions valuing $31.5 million.
The scrips that lured most of offshore investment were food producers and chemical with respective inflows of $14.1 million and $7.5 million. Major selling of $8.5 million and $3.2 million took place by foreigners in technology and communication and cement sectors.
Topline analysts attributed the market's weekly gain to positive news like Moody's upgraded credit rating to Pakistan and MSCI having decided to place Pakistani equities on its 2016 Annual Market Classification Review for a potential re-classification to emerging markets.
"The local bourses totally ignored the negative (budgetary) developments and started with the positive tone," viewed Abdul Azeem of Spectrum Research.
The proposed budget for FY16 disappointed the market participants by envisaging 2.5 percent raise in Capital Gains Tax as well as on dividend income.
The new fiscal plan, however, was not negative for KSE totally as higher development allocations for development expenditure by federal and provincial governments, including infrastructure and power sectors projects, boosted the index.
"The string rally was also observed in the oil and related sectors as the WTI were up $2.38, or 4.1 percent, at $60.47 a barrel at the end of Thursday," said Azeem.
Raheel Ashraf of GS Research observed that institutional buying in undervalued issues proved to be a game changer for KSE-100 that started the budget week with 875 points or 2.6 percent dip.
Higher development outlay, up 27 percent YoY, and incentives for the construction sector in the budget led gains in cement stocks, the equity analyst said.
Other key highlights of the week were: a report that Pakistan likely to get $1.5bn from the US under Coalition Support Fund in FY16, remittances clocking in 16 percent YoY higher at $16.6bn in 11MFY15, trade deficit widening by 11.7 percent in 11MFY15 and the Finance Minister vowing to review projected 'Tax on Undistributed Reserves' in the budget. Going forward, Azeem foresees the market sentiments to remain positive which may lead to further growth. "Continued economic recovery coupled with positive reviews of the country would further magnetise foreign inflows," he hoped.

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