Karachi stock market sees poor Q2 results to cap gains

Oil price gains and an expected softness in inflation numbers for the month of January may boost the sentiment of equity investors, although there could be some bad news to come when several key energy firms report their second-quarter results next week.
The central bank made a surprise cut in its key discount rate last month, saying plummeting global oil and soft commodities prices had eased inflation risks while economic growth was rebounding.
The move may reinforce the optimistic sentiment that has driven the market’s rally last week; cheaper oil is likely to ease pressure both on Pakistan’s budget and balance of payments.
An analyst at KASB Securities said the market keenly awaits quarterly numbers from companies, including Hub Power Company (HUBC), Pakistan State Oil (PSO), and Oil and Gas Development Company (OGDC).
“Given consistent market performance, we recommend exposure to strong growth, and attractive yield plays especially from large-cap (less volatile) stocks,” the analyst said. Karachi Stock Exchange benchmark 100 Index gained 1.2 percent or 417 points to close the week at 34,443 points after a surprise rate cut of 100 basis-point by the central bank. Average daily volume declined by 1.3 percent to 298 million shares due to deteriorating law and order in the city, value traded per day fell 8.8 percent week on week to $169 million.
Foreign portfolio investment witnessed an increase of 101 percent to $3.3 million from $1.7 million last week.
Stock specific performance was largely influenced by the result announcements during the week.
Results of exploration and productions firms were lower than expected; but oil steadying at current levels offered some support. Most of other results were in line with market expectation, including those of Fauji Fertilizer (FFC), Fauji Fertilizer Bin Qasim Limited (FFBL) and Attock Petroleum Limited (APL).
The highly leveraged cements (up 4.5 percent week on week) and Engro Fertilizers (up 7.2 percent week on week) remained in the limelight given the cut in the discount rate. Heavy-weight oil and gas sector (down 2.8 percent week on week) was a key laggard during the outgoing week due to below-than-expected earnings announcements.
Cements remained in limelight, led by LUCK (up 3.7 percent) with news of company obtaining government’s no objection certificate over its proposed 660MW coal based power plants.
ENGRO (up 7.1 percent) was the driving force during the week, adding 87 points as news on progress of liquefied natural gas (LNG) imports coupled with possible materialisation of secondary public offering of Engro Fertilizers kept the momentum in the scrip intact.
Other key highlights of the week were government approving upfront tariff for Thar coal-fired projects, minister confirming first shipment of LNG to arrive on 31 March, KSE mulling easing cap on shares trade and K-Electric signing accord with Chinese companies to setup 700MW coal-fired power project.
One analyst report of Elixir Securities said index remained upbeat during the week with 5th consecutive week of gains after Central Bank announced 100bps cut in policy rate over the weekend. Arif Habib Corporation, Kohinoor Textile, Cherat Cement, Packages Limited and Kohat Cement were the major gainers while JDW Sugar, Shezan International, Attock Refinery, Lotte Chemical Pakistan and Attock Petroleum Limited were the major losers in the benchmark KSE-100 this week.