KARACHI – The prevalent bullish trend at the KSE helped the index cross the 11,900 points barrier as it peaked at 11,927 points on the first day of the week. The index fluctuated around this point throughout the week, moving in both directions.
Christmas holidays muted the foreign inflow of funds to merely $5.64 million during the outgoing week and participation of foreign investors is unlikely in the last week of the year. Local punters and fund managers would lead the market’s momentum in their absence.
In addition, profit booking by local financial institutions played a pivotal role in the current week’s range bound behavior. The current year has seen the index register a return of 26.33 percent, while only five working days are left before CY10 turns into a history. The index is expected to increase further and it would not be a surprise if it breaches the 12,000 level.
Volume remained slim during the outgoing year, as the average daily volume was a meager 121 million shares. Most sectors have posted better profits as a result of the improved economy. However, a few glitches that hindered economic progression were power crises blotched by circular debt and nationwide flooding that restricted the economy from moving forward. Despite wavy behavior of the index, few stocks from the low volume board clearly dominated the market returns.
These include Thal, Packages along with Pakistan Refinery and Habib Metropolitan Bank. OGDC, the index giant moved with the market, while the residual E&P players remained down and under. NBP and MCB moved in upwards direction followed by UBL, while HBL and ABL dented the overall banking sector performance. News in relation with Engro’s new plant became operational and price hike by FFC kept stocks in the limelight.
The government is likely to approach IMF, seeking extension in deadline for implementing reformed GST and management of circular debt. Lack of consensus on reformed GST will not allow the government from implementing the bill w.e.f Jan 1, 2010. Oil prices are on the rise in the international market due to winters and this is likely to push local petroleum prices up by seven to eight percent in the new year.
Inflation continued to remain hawkish in December and with the unfavorable factors at work in Jan 2011, another discount rate hike may be in the making. This is further validated by higher interest and exposure in shorter tenor bonds by market participants. Furthermore, in a recent move, Moody’s has downgraded the rating of all Pakistani banks due to their inclination towards government debt instruments.
