Rate cut hopes, US aid help recover losses on KSE

[LahoreEstate]

Sunday, June 21, 2009
By our correspondent

KARACHI: Strong signs of a reduction in interest rate in near future and news from Washington to triple non-military aid to Pakistan compensated the negative impact of the 2009-10 budget for the Karachi bourse during the week ended on June 19.

The market, however, ended the week with modest losses. The KSE 100-share index fell by 16.58 points or 0.23 per cent and closed at 7,039.73 points. The parallel-running junior 30-index, which is based on free-float market capitalisation, also fell by 70.82 points or 0.94 per cent and ended the week at 7,448.03 points. Only one session during the week i.e. on Wednesday closed on a positive note. On that day, the benchmark 100-index rose by 202.97 points or 2.95 per cent on news of a 100 basis point cut in the yield of 12-month treasury bills auctioned by the State Bank of Pakistan. Cut in the T-bills yield is a strong sign of expected reduction in interest rates, experts said and added if that happens it will prove healthy for the stock markets.

Moreover, the same day’s (Wednesday) newspapers flashed news from Washington that its senate committee on foreign relations has unanimously passed the bill aiming at tripling non-military aid to Pakistan to $7.5 billion. This aid would be granted to Pakistan in the next five years after the approval of full senate.

This news also helped to revive bullish sentiments in the market, as this aid is believed to greatly help Pakistan manage its badly hit economic affairs, they added. The first two sessions of the week (Monday & Tuesday) reacted negatively to the shocking budget, which was presented on last Saturday for the next fiscal year 2010.

The budget was termed an anti-business, trade and industrial activities, which the adviser to the PM on finance has agreed to rectify on next Monday, June 22. The first reaction to the budget, however, forced investors to take an exit at the current levels, an analyst commented. Under the uncertain economic outlook, therefore, the two last sessions of the week (Thursday & Friday) also closed under the selling pressure, but did not incur heavy loss. The cumulative losses of all four negative closing sessions of the week together stood at 219.55 points.

Owing to the proposed imposition of 16 per cent Federal Exercise Duty (FED) on the services provide by the stock brokers under Value Added Tax (VAT) regime, the daily turnover decreased to three month low at 64.4 million shares in a single session on Tuesday.

Moreover, the average daily turnover of the week slashed down by about 20 per cent on week-on-week basis to 101.6 million shares against 126.6 million shares changed hands last week. On the contrary, the overall market capitalisation luckily steadied by Rs6 billion to stand at Rs2,088 billion.

This also included an inflow of Rs105.9 million (i.e. $1.3 million) from overseas investors recorded this week. The most active stocks of the week remained the same as were last week.

The only one difference between the two weeks was that investors had injected funds due to the hope for witnessing a business friendly budget in last pre-budget week and disinvested in first post-budget week. Those leading stocks were from cement and textile sectors, followed by the securities companies, bank, telecom and fertilizer sectors. Selective stocks on the anticipated buying by foreigners, however, managed to close on positive note. Gul-e-Zehra Jafri at KASB Securities suggested that the forthcoming meeting of government high officials with the IMF team has been scheduled for June 28; rectification of anomalies pointed out in the budget and finance bill for 2010; and the July monetary policy announcement by the central bank should be kept in the close focus. Decision in three events would impact the market in some ways.

Movement in weekly volume leaders

Symbols Opening on Close on Difference

Monday (Rs) Friday (Rs) (Rs)

AH Securities 27.45 28.72 1.27

Azgard Nine 23.78 21.89 -1.89

DGK Cement 28.37 27.69 -0.68

JS Company 25.27 24.5 -0.77

Lucky Cement 57.24 57.21 -0.03

MCB Bank 148.57 142.06 -6.51

National Bank 60.97 64.85 3.88

Nishat Mills 40.87 36.96 -3.91

OGDC 73.12 75.42 2.3

PTCL 15.47 16.53 1.06

http://www.thenews.com.pk/daily_detail.asp?id=184099