KARACHI – The result season has begun as PPL, FFBL, FFC, and POL have declared half year financial results, whereas LOTPTA has announced annual results. Majority of the results were inline with analysts’ expectation except for FFBL. The current week’s index performance depicted the same dreary tendency.
The stock market moved within a narrow band of 207 points, touching a high of 12,557 and low of 12,350 points. The index gained a mere 31 points, with a considerably low average volume of 117 million shares in contrast with month to date average volume of 173 million. We believe that the stock market seems to be in a range bound mood where positive news flow, emanating from annual and half yearly results, are already incorporated in prices, hence reducing the charm for individual stocks to move upwards, said Bilal Asif at HMFS.
Analyst and market experts are equally divided on monetary policy expectation. The recent hike in cut off yield in T-bill for 3M and 6M was increased by 23bps and 16bps respectively to 13.67 percent and 13.71 percent, clearly depicting that the discount rate may be higher. Undoubtedly, inflation is expected to move downwards but there is a need to consider the government’s decision to keep petroleum prices unaltered. It is widely estimated that the government would revise petroleum product prices substantially upwards, which would impact inflation numbers for the month of February.
Fiscal deficit is expected to reach 8.4 percent of the GDP, while in the absence of budgetary support from external sources; government is likely to utilise inflationary borrowing from SBP. Low volume stocks including Nestle, Unilever food and Packages lead the gainers list. LOTPTA was among the major gainers following its result announcement. The charm of LOTPTA has increased substantially due to low stock value.
FFC, despite good results, was unable to convince the bull to add value to stock price. T-bill auction was held on Jan 26, where SBP raised the realised amount of Rs 197 billion including NCB against the target of Rs 185 billion. Yields in the primary market jumped further with highest increment in 3M paper by 23bps to 13.67 percent followed by 6M and 12M by 16bps and 10 bps to 13.71 percent and 13.88 percent respectively.
Ensuing to the auction, the benchmark 6M KIBOR has further pushed by 28bps to mid quote of 13.78 percent. In the light of recent developments, SBP is expected to raise discount rate by 50bps to 14.50 percent in the upcoming MPS, while government borrowing from SBP has contracted sharply by Rs 196 billion since the peak of Rs 328 billion hit in mid December.
Subsequently, contraction in NDA and NFA has curtailed M2 growth to 7.86 percent on FYTD basis. Although, resilience of Pakistani rupee is admirable on YTD basis, depicting little depreciation, the second half is expected to be challenging due to a greater pressure on balance of payment.
