KARACHI: The Karachi Stock Exchange underwent a gradual rise in traded shares as a flurry of positive news this week stimulated investor participation. The traded shares increased from an 81 million on Monday to 195 million on Friday.
The activity had been dull initially, but the much awaited resolution of the turnover tax issue (lowered to 0.5 percent again), word of an oil discovery and a hike in oil prices acted as a catalyst, especially for the energy scrips.
The index sustained a bullish trend with minor hiccups on the first and third day of the month. Bulls rushed the index onto the path of recovery on the last trading day of the week adding over 179 points to the KSE-100 index.
The week ending on Nov 5, 2010 gained over 284 points or 2.68 percent while the average daily traded volume was 123 million shares. It was earlier believed that the benchmark index may halt for a breather after moving up by 5.84 percent in the preceding month; however, the energetic bull remained active with a meager correction in two of the five sessions during the week.
The impetus during the week was driven by a reduction in turnover tax to 0.5 percent from 1.0 percent as the market accumulated 143 points. However, short term profit booking resulted in a correction of 64 points making way for swift upswing and closing the week at 10,881 points.
Local bourse was dominated by the bull as 77 percent of the companies posted gains. Index heavy oil sector dominated the outgoing week as PPL, OGD, POL, PSO, PRL and NRL all posted gains, while punters favoured ATRL and APL, which clearly demonstrated the stamp of oil sector on index performance.
Top tier banks replicated the index performance up to a certain extent whereas second tier banks, including FABL, reactivated following declaration of merger scheme with RBS and Bulls of Punjab – BOP surged forward aggressively. Furthermore, power sector and fertiliser moved with the bullish wind.
On the economic front, a rumoured consensus with the IMF as part of the SBA and the latest tax figures boosted the investor confidence. Discussions between the IMF and Pakistani officials are finally said to have experienced a breakthrough by the end of the week, as a 4.7 percent fiscal deficit target, a plan to eliminate the circular debt, public listing of power companies and to present the RGST bill in the Parliament’s current session were agreed.
This offered some hope with respect to the timely release of the 5th tranche under the SBA. October’s tax revenue exceeded the target by Rs 70 million, indicating that the shortfall witnessed so far was likely to diminish going forward.
Improving GRMs and later, rumour of an oil discovery in Makori East caused gains in Exploration and Production (E&P) and Refinery stocks, especially in POL, PPL and OGDC. The same, along with gas utility and OMC scrips experienced investor frenzy, post news of the Government of Pakistan approving the reversal of the turnover tax rate to 0.5 percent, from the one percent announced in the Budget Financial Year 2011.
According to the Angela Memon at JS research, the PSO, understood to be a major beneficiary gained a weekly 6.3 percent while SHEL gained a weekly 9.5 percent post this development.
Foreigners became net buyers of $12.7million during the week, with individuals, leading net sellers of $8.5mn. Bilal Asif at HMFS said ‘we believe market is in no mood to rest, hence index may probably move forward in the upcoming week. Inflation numbers for the month of October and monetary policy by end of the current month would be crucial to set the market tone in the long run.’
