Lull expected in week’s opening

Karachi stock index pointed to a quiet open next week, although investors continued to watch financial numbers as strong corporate earnings can support equity gains, analysts said.
Equities have been in an uptrend lately and the Karachi Stock Exchange benchmark 100 Index gained 0.1 percent or 50 points to 33,993 points during the week. Much of the advance came on signs of improvements in fundamentals and solid corporate results.
Average trading volume declined by 22 percent to 212 million shares against 272 million shares last week, value traded per day fell 30 percent week on week basis to $115 million. Foreign portfolio investment was recorded at $9.3 million.
An analyst at KASB Securities said investment in solid growth or undervalued companies is likely to remain stronger as earnings season is about to end. “To this end, Engro remains our favored pick on the back of healthy growth triggers lined up,” the analyst said. Exploration and production stocks are trading at bargain prices and will continue to attract attentions, he said.
Fatima Fertilizer (down 1.6 percent week on week) got a go-ahead from the government to raise $300 million from global debt markets for its green field fertiliser plant in the US. With expansion mantra not yet settled, major chemicals player ICI Pakistan (up 0.5 percent) not only posted encouraging half yearly results last week, but also announced to expand its Soda Ash operation.
Besides expansionary ambitions, corporate acquisition plans also dominated headlines. FFBL’s board approved acquisition of 24.9 percent stake in dairy player Noon Pakistan (owners of Nurpur brand). Ismail Industries, having already increased its holdings in Bank of Khyber substantially, revealed the intention to acquire 25 percent stake in the bank.
The KASB analyst said the result season maintained positive momentum during the last week, with power sector earnings and payouts coming in on the higher side of anticipation, triggering 2.2 percent rally in the sector. Macro news flow continued with encouraging tones. Fiscal deficit for 1HFY15 remained comfortably within the target at 2.2 percent of GDP.
SBP’s 1QFY15 report highlighted a mixed picture, stressing the need to focus on fiscal reform. Raheel Ashraf, an analyst at JS Research said the KSE witnessed mixed sentiments during the outgoing week with the corporate result season in full swing.
“Higher-than-expected result announcement by DG Khan Cement prompted fresh buying into the cement sector,” he said. “However news of potential expansion by DGKC dampened investors’ optimism.”
ENGRO remained in the limelight, announcing better-than-expected 2014 earnings and intention to sell its EXIMP business to Engro Fertilizer (EFERT).
Other key highlights of the week were Pakistan finalising $21 billion liquefied natural gas deal with Qatar, State Bank of Pakistan revising down FY15 inflation target to 4.5-5.5 percent from initial target of eight percent, OGRA asking the government to approve gas tariff hike to save gas utilities from collapse, foreign exchange reserves rising to $16.04 billion and a federal minster hinting at discontinuation of subsidised sale of power to K-Electric.
Bata (Pakistan), Nishat Power Ltd, Nishat Chunian Power, Soneri Bank and Engro Corporation were the major gainers, while Mari Gas, Pakistan Tobacco Company, Standard Chartered Bank, EFU General Insurance and Kohinoor Textile were the major losers in the benchmark KSE-100 last week.