The benchmark performance was fairly impressive in the outgoing week as the index gained around 3.52 per cent. The index heavy weight OGDC came back strongly with a Rs14.28/share gain adding approximately 299 points of the total week gain of 396 points. The upwards movement in Oil sectors stock can be attributed to expectation of circular debt resolution.
During the week inflation numbers were released where MoM inflation was up by 1.44 per cent while year to date inflation comes to around 11.34 per cent. We believe the pre-Eid season and flood impacted the inflation numbers, said Bilal Asif at HMFS, adding that we estimate year end inflation to be around 12.5 per cent, hence SBP may not be able to cut the DR in the upcoming monetary policy.
On the positive side, LSM growth was fairly impressive, but concerns over exports and current account situation remain critical. During the current fiscal year, around USD2billion payment to IMF may impact our reserve and current account status. Fertiliser stocks backed by frequent price hike remain in the limelight, Oil stock were in active mood backed by possible resolution of circular debt. But we believe the current resolution would be temporary, hence circular debt may one again occur going forward.
Monthly Review: Index Band of 1,000 points depict volatility: The benchmark was moving in a wavy pattern moving in a band of 1,000 points. Single day in the preceding 4 weeks of the month dominated the week. The surprise DR cut of 150bps taking the cumulative YTD DR cut to 200bps can be considered as a sentiment booster, but the impact didn’t last long. HUBC’s one time sell-off of 140mn shares impacted overall volumes positively while having the opposite effect on FIPS numbers and the share price of the stock. The overall average daily volume for the month jumped to 81.42mn shares and if we exclude HUBCO’s 140mn shares, average daily volume for the month tones down to 74.42mn shares depicting a mere improvement of 3.7 per cent MoM.
Furthermore fertiliser stocks remain in the limelight as Fatima price appreciated by 40.7 per cent followed by FFC 19.5 per cent on account of frequent upward adjustment in Urea prices. Quarterly Results of OGDC, PSO, UBL, FFC, LUCK and FFBL results were fairly impressive. But most of the above mentioned stocks were unable to present the same kind of trend in the share price appreciation.
T-bill Auction: During the week SBP conducted T-bill auction raising Rs 293billion including NCBs against the target of Rs 215billion as Cut-off yield on 6 months paper witnessed the highest rate cut of 11bps to 11.81 per cent followed by 3 month paper which was lowered by 9bps to 11.78 per cent while rates on 12 months paper was slashed by 6bps to 11.88 per cent. It is pertinent to note that recent attrition in primary yields have lowered rates on 12 months paper by 200bps since the peak of 13.91 per cent touched in the beginning of fiscal year. Furthermore, CPI for the month of October landed at 10.96 per cent YoY, depicting increase of 1.4 per cent MoM basis. Inflation during October was largely driven by increase in prices of food essentials and non-alcoholic beverages.
Government borrowing for budgetary support has swelled by Rs280 billion to Rs2.9 trillion for the week ending on October 21, 2011, whilst money supply accretion remains negative at 0.18 per cent on a FY12TD basis. Despite widening rate differentials and looming debt payment, targeted intervention by central bank has also arrested depreciation of Pakistani Rupee against green back to 0.96 per cent since the beginning of fiscal year from 1.8 per cent at the end of 1QFY11.
