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October 18, 2015

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Karachi stocks to take cue from oil prices, regional performance

Karachi stocks will take cue from international oil prices and performance of regional markets in the next shortened week due to Muharram holidays; although the sector-specific unease restrained the broad-based rally, dealers said.
The KSE 100-share Index gained 111.8 points, or 0.33 percent, to end the week at 33,954.98 points. KSE 30-share Index was up 24.75 points, or 0.12 percent, to close at 20,408.57 points. Most of the activity was concentrated in the low market cap 2nd and 3rd tier scrips as average weekly volumes surged 3.4 percent to 181 million shares a day.
Earnings announcements of only few big tickets, including Pakistan Petroleum Limited and Engro Foods could keep market from giving a meaningful upside.
“Nonetheless, the sector specific concerns continued to hinder broad based rally and the tug of war between the bulls and bears continued throughout the week with major opportunistic trading activity in the index heavyweights such as oil and gas, banks, cements and fertilisers,” said analyst Faizan Ahmed at JS Global. Foreign investors continued to be indulged into the selling frenzy with net outflow during the week clocking in at $9.0 million.
Analyst Fahad Qasim at Topline Securities said regional markets rallied with Chinese stocks extending their rally to 8-week high during the last week.
The standoff between business community and the government over 0.3 percent tax on bank transactions of above Rs50,000 threshold for tax return non-filers has apparently come to an end with the government reaching an agreement over 0.2 percent till 31 December.
The issue of potential reduction in urea prices isn’t resolved. Media reports said urea prices will be raised only Rs15/bag, implying up to Rs145/bag reduction in current urea prices. Lucky Cement’s expansion plan was substantiated by its chief executive officer, who confirmed that the decision will be taken in its October’s board of directors meeting. However, the

market seems to be appreciating the low probability of a price disruption in the near-term due to the expansion spree in the sector. On macro front, remittances jumped 16 percent in September 2015 to $1.77 billion, thanks to the seasonal Eid effect.
Meanwhile, trade deficit also contracted 12 percent in September 2015, to $1.75 billion, as imports declined 8.8 percent to $3.5 billion while exports dropped 5.6 percent to $1.7 billion. Foreign direct investment was up by meager 7.7 percent to $216 million supported by China’s highest inflow of $190 million.

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