The continuing global crisis and stern messages from US Secretary of State, Hilary Clinton overshadowed the impressive corporate results. The exceptional results of POL and ATRL posting a respective 55 per cent YoY and 53 per cent YoY rise in profits were unable to stir the market sentiment. The market closed the week at 11,525 level, down 3.9 per cent WoW. Average daily volumes shrank by 31 per cent WoW to 86 million shares, while foreigners remained net sellers of $67million. Xenel Industries of Saudi Arabia (Co-founder of Hub Power) sold its 12 per cent holding in Hub Power leading to a one off foreign outflow of $60 million. Moreover, Mr Yaseen Anwar was appointed as the governor of the SBP during the week.
Macro releases largely disappointing: Foreign investment for 1QFY12 clocked in at $236 million in 1QFY12 (down 49 per cent YoY), while current account deficit widened to $908 million in September 2011. Moreover, textile exports during Sept were recorded at $982 million, down 10 per cent MoM. The much awaited ground breaking of $12 billion Diamer-Bhasha dam project was laid by the Prime Minister during the week; however financing matters are still to be resolved. The cement sector is expected to be a major beneficiary from this project.
Gas curtailment keeps fertilisers in limelight: Fertiliser sector remained in the limelight throughout the week as initial news reports suggested that gas supply to SNGPL network powered plants will remain suspended throughout the week. However, a ruling by the Sindh High Court came in later during the week which directed SNGPL to supply 100mmcfd gas to Engro’s new plant – speculating a downward revision in the urea prices. Hence, the sector came down by 5.1 per cent during the week led by Engro and FFC, down 13.7 per cent and 5.4 per cent, respectively, said Naveed Tehsin at JS.
LAHORE
AAHYAN MUMTAZ
The KSE-100 Index shed 493 points during the week on the back of investor concerns over deteriorating Pak-US relations, meek global outlook, and heavy foreign net selling. This translated into a decline of 3.9% WoW despite strong corporate results which failed to stir the market. Investor activity seemed bleak as average daily volumes declined 31% WoW to stand at 86.1mln shares. Foreign investment outflow was mainly due to the sell-off of the 12% stake held in HUBCO by its co-founder Xenel International Saudi Arabia. This transaction was conducted in the OTC market for a total consideration of USD 60mln. However, even adjusting for this, foreigners remained net sellers of ~USD 7mln. This comes on the back of fresh concerns over the global economic picture following speculation of an unprecedented $1.3 trillion bailout package for EU countries. The negative sentiments also arise from stern comments made by US Senator Hillary Clinton on Pakistan’s recent cooperation in the war on terror during her visit to the country. This raised concerns regarding the already strained Pak-US relations.
Stock Specific Activity
Macro data released did not present a positive picture with the current a/c deficit widening to near USD 1bln along with declining investment. This was despite strong corporate results, led by POL and ATRL who posted profit growth of 55% and 53% YoY respectively. The fertilizer sector remained in the limelight with an announcement of additional gas curtailment coming at the start of the week. This, accompanied by an immediate urea price hike, seemed to benefit like it has done so in the past FFC, FFBL, and FATIMA. However, with a following Sindh High Court order for the release of gas and speculating a downward revision in urea prices, the performance of fertilizer stocks weakened. Eventually as a whole, the sector closed in the negative. Furthermore, activity was witnessed in NML which declined considerably owing to the payment of dividend as well as feeling the negative impact of PKR appreciation against the dollar – in which the company earns most of its proceeds.
Macro data released did not present a positive picture with the current a/c deficit widening to near USD 1bln along with declining investment. This was despite strong corporate results, led by POL and ATRL who posted profit growth of 55% and 53% YoY respectively. The fertilizer sector remained in the limelight with an announcement of additional gas curtailment coming at the start of the week. This, accompanied by an immediate urea price hike, seemed to benefit like it has done so in the past FFC, FFBL, and FATIMA. However, with a following Sindh High Court order for the release of gas and speculating a downward revision in urea prices, the performance of fertilizer stocks weakened. Eventually as a whole, the sector closed in the negative. Furthermore, activity was witnessed in NML which declined considerably owing to the payment of dividend as well as feeling the negative impact of PKR appreciation against the dollar – in which the company earns most of its proceeds.
Overall negative sentiments prevailed in the backdrop of weakened macroeconomic and political fronts. If the futures market is anything to go by, continuation of the same can be expected with muted activity limited to specific stocks. Moreover, the trend of foreign selling is likely to be a key determinant in market performance for the upcoming week. Although the foundations of the much touted Diamer-Bhasha damn were laid during the week, much progress is still to be made before any actual benefit can be realised. This is expected to help cement stocks by spurring demand. Moreover, as per the current a/c trend, pressure on the rupee is imminent; depreciation of which beckons benefit for textile / export oriented companies. However, timing entry for upcoming sessions is critical.