The week started out on a sombre note, with the extension of the index decline146s by 470 points in the first two days. The index had pulled back by 405 points last week.
However, the staggering market recovered on Wednesday and posted an unexpectedly heavy gain of 615 points. The bullish fervor on the day took the market by surprise, since most pundits were predicting lacklustre trading in the last session before the long Eid holidays.
The steep fall in stock prices in the first two days of the week was triggered by higher-than-expected July inflation, which raised the specter of an increase in the discount rate by the State Bank of Pakistan in the upcoming monetary policy statement (MPS). Investors expressed concern that the rise in interest rates would impact the profitability of leveraged companies, mainly in the cement and textile sectors. The monetary tightening was also thought to be a pre-condition before the IMF executive board approves the loan.
Other sentiment dampeners were concerns over the law and order situation, and disappointing financial results posted by two heavyweight companies, Engro Foods and Oil and Gas Development Company (OGDC).
The recovery on Wednesday was initially led by the banking sector on expectations of a rise in interest rates in the first half of next year. The bullish sentiments subsequently spilled over to other sectors.
The Pakistani equity market has gained 37.45 per cent in 2013 to-date, outperforming almost all global markets, except for the smaller Abu Dhabi bourse, which has produced a return of 49.36 per cent. Interestingly, the Mumbai Sensex index has given a negative return of 4.02 per cent in the current year to-date.
Foreign inflows into the Pakistani market stood at $7.71 million during the week, which compared favourably with the prior week146s nominal inflow of $0.56 million.
The news flow during the week included the global ratings agency, Standard & Poor146s, affirming Pakistan146s rating, and the decline in July14613 cement dispatches by eight per cent over the same month last year and 10 per cent over the earlier month, largely due to seasonal factors. Other key highlights of the week included the hike in power tariff, and Pakistan Telecommunication Authority (PTA) initiating a drive to curb international grey traffic.
Average daily volumes collapsed by 18.52 per cent to just 169 million shares during the week, against 207 million shares traded in the previous week. The sharp plunge in volume was attributed to a three-session week, with Eid holidays starting from Thursday, and lack of investor interest in the last days of Ramazan when attendance at the market is generally thin. Average daily trading value amounted to Rs9.01 billion, representing a drop of 2.5 per cent from the daily average of Rs9.24 billion in the earlier week.
Market capitalisation recouped Rs33 billion or 0.58 per cent last week, from a loss of Rs51 billion in the earlier week. It closed at Rs5.725 trillion last week, up from Rs5.692 trillion at the end of the prior week.
The biggest gainers during the week were Dawood Hercules, Millat Tractors, Bank Al-Falah, United Bank Limited, Muslim Commercial Bank, Attock Refinery, National Bank of Pakistan, OGDC, NIB Bank, Clariant Pak, Mari Gas and Colgate Palmolive.
The major losers during the week were Sui Northern Gas Company Limited, Engro Polymer, Honda Car, IGI Insurance, Engro Foods, GlaxoSmithKline and Fauji Cement Company.
The volume leaders during the week were Fauji Cement Company, Bank of Punjab and the National Bank of Pakistan.
Financial results: The stock with the heaviest weightage in the index 151 OGDC 151 posted earnings per share (eps) of Rs21.11 for the financial year ended June 30, which was six per cent lower than last year. The company declared a cash dividend of Rs8.25.
Fatima Fertiliser declared eps of Rs1.60 for the first half of financial year 2013, which was higher by 25 per cent over earnings for the earlier year.
Future outlook: Analysts at AKD Securities forecast that after Eid holidays, market participants are likely to keep a close watch on corporate financial figures. Some of the upcoming big ticket results include those from Bank Al-Falah, Attock Refinery, Attock Petroleum, Pakistan Oilfields (POL), Pakistan Petroleum (PPL) and Muslim Commercial Bank.
The investors would also keep an eye on the central banks MPS. Many market participants believed that there an increase of five per cent in the discount rate is likely in the upcoming MPS. AKD analysts, however, thought that the central bank might adopt a wait-and-see approach for now.
Upcoming corporate results should set the future direction of the market, forecasted analysts at KASB Securities. Given the overall markets recent strong performance, analysts advised a cherry -picking approach to portfolio construction. Dilawar Hussain
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