Finally after seven consecutive positive sessions, with a big bang on September 21, 2011 hitting a triple tonne, the benchmark witnessed a correction phase in the following two trading session. The benchmark return for the week was around 2.23 per cent whereas the month to date return of 4.84 per cent seems to recover merely half of the points lost in the August turmoil. During the week, news about new petroleum policy fuelled the aggressive bull with the oil sector climbing higher and higher. Also the Federal Bureau of Statistics (FBS) has changed the CPI inflation base year from FY01 to FY08 which will tone down the inflation number for the month. The investor community was in a jubilated mood as they can expect another discount rate cut which can jack-up the fundamental valuation.
The geo-political situation twisted and turned as Admiral Mike Mullen made a statement about Pakistan’s premier agency ISI’s involvement in attacks in Afghanistan with the support of the Haqqani network. Once again chances of direct incursion may be possible. But this time around the allegations are extremely horrifying. The real picture depicts, after over 10-years of war US was unable to control the Taliban from Afghanistan. Hence it seems that a blame game is about to begin where the victim would in all likelihood be Pakistan. Keeping all geo-political analysis aside, our market would face the consequences of such political adventures where investor confidence is still on the lower side. The global economic turmoil was once again in the limelight after Lagarde’s statement that “The world economy is in a dangerous new phase, with risks on the rise, but while the problems are largely economic, the solutions are mainly political”. The IMF expects the emerging economies will continue to grow at a faster pace of 6.4 per cent in contrast with developed economy while established economies may witness a marginal growth rate of 1.6 per cent. The European Union affected by Greece debt crises and Italian rating cut impacted the global financial markets. Looking at the top 100 stocks, 50 per cent of the KSE-100 stocks depicted a gain in the week ended on September 23, 2011 while around 40 per cent of the stock posted negative return. With new petroleum policy pushed the index heavy OGDC while possible payment to PSO jacked their stocks upward.
T-bill auction: During the week SBP conducted the T-bill auction raising Rs151 billion including NCBs against the target of Rs130 billion causing net drainage of Rs35 billion from the system. Cut-off yield on 12M witnessed highest rate cut of 9bps to 13.31 per cent followed by 3M paper which was lowered by 7bps to 13.23 per cent. Rates on 3M paper remained unchanged at 13.07 per cent whilst investor participation also remained highly skewed towards the long end of the curve. Rebasing and tinkered methodology including composition overhaul brought YoY inflation down to 11.56 per cent for August 2011, which has further strengthened the case for an inverted curve ahead. Lowering yields differentials coupled with higher import and debt payments continue to exert pressure on Pakistani Rupee, which has depreciated by 1.8 per cent since the beginning of fiscal year. Money supply shrunk despite rise in NDA as NFA continued to contract putting further pressure on the feeble Pakistani Rupee.
