KARACHI – A healthy correction of around 121 points during the initial two trading sessions of the week provided the much needed boost to the bull in its ascent. During the preceding three trading days benchmark index gradually gathered pace and exhibited a bullish trend.
The market momentum was backed by established foreign investors who aggressively invested in the market. On Thursday, investment of around $11.76 million was conducted which pushed the benchmark index up by 178 points in a single day, followed by 74 points gain on Friday on which foreign investment of around $6.72 million. During the week, the stock market received a strong response from foreign investors who invested $29.29 million as month to date foreign investment now stands at $41.22 million. The trend is contrary to the same time last year when overseas investors merely invested $4.27 million.
Monthly inflation numbers were released during the week when monthly CPI inflation was down by 0.51 percent, while annual inflation was recorded at 15.46 percent. Furthermore, inflation in the first half of Financial Year 2011 was recorded at 14.61 percent. Relatively lower inflation during December can be attributed to the higher prices of perishable and non-perishable food items in November 2010.
In addition, the government maintained oil prices at the same level in December and was unable to pass on the fuel prices in January due to political considerations, which can possibly kicked out the regime in power. The remittance received by the country from overseas Pakistani provided the much required support during crunch time as remittance were up by 16.80 percent to 5291.41 million.
Top tier banks, were on a roll with its scrips leading the advance in banking sector with a gain of 7.68 percent followed by minor gains in other sector stocks. The majority of the banks have already attained their target price for Calendar Year 2011 with hopes resting on the upcoming annual results which may provide investors with a pleasant surprise.
International oil prices hovering over $90 per barrel, oil related stocks performance was strong as made evident by the Attock oil group of companies’ performance. All major stocks were on the move in the last couple of weeks with very few valuable stocks remaining.
During the week, T-bill auction was held where SBP raised realised amount of Rs 166 billion including NCB against the target of Rs 175 billion. Treasury yields in the primary market jumped further upwards with highest in 3M paper by 18bps to 13.44 percent followed by 6M by 9bps to 13.55 percent.
All bids for 12M paper were rejected by SBP. Heavy participation in 3M had risen once again in tandem with commodity prices and ignited fear of an imminent rise in inflationary pressures. Furthermore, inflation numbers for Dec 2010 were released by FBS. Stubborn inflationary pressures persist, as CPI was recorded at 15.46 percent in annual terms however food deflation contributed to a monthly decline of 0.51 percent. Although the resilience of Pakistani Rupees is admirable, depicting depreciation by meager 0.30 percent since the beginning of fiscal year, pressure continues to mount owing to widening inflation differential. Market yields are likely to move further up before retraction owing to tightening monetary stance and heavy financing requirement of the government.
