Over the weekend Finance Minister visited the Karachi Stock Exchange along with SECP chief and FBR officials. Dr Sheikh accepted the recommendations of the SECP chief which provided a boost to investor sentiments. The jubilant investors entered the market on Monday registering a gain of over 263 points with volume of around 230m shares.
The relaxation in reporting and no question asked over the source of income was the key towards the revival of the capital market. The anomaly created by tax exemption which lasted for over 36‐years with no documentation requirement resulted in an undocumented wealth generated over a long period. The relaxation in documentation may provide ample time to investors to declare the wealth generated from capital appreciation over a longer period of time. The major reason behind such popular decision may aim at improving the views about the current regime before the general election.
The quarterly result season kicked‐off with PPL that announced its financial result for the 1HFY12 inline with analyst expectation, whereas FFBL CY11 results outwit the analysts’ expectations. LOTPTA result was well below analyst expectation, consequently the share price depreciated substantially. Engro recovered substantial ground along with FFC riding on the back of bonus expectation while hike in domestic prices of cement likely to boost the profitability of Lucky and DGKC. The cash rich banking sector is likely declare cash payout along with a share dividend with annual result announcement.
The decline in yield in the money market instruments predict a possible cut in discount rate in the upcoming monetary policy statement, which can be termed as a fuel injector for the stock market. The result season may continue to dominate the market sentiment in the upcoming week, where FFC, Lucky and POL are schedule to declare their financial results, said Bilal Asif at HMFS.
Money Market: During the week SBP conducted T-bill auction where it raised Rs120.3b against the target of Rs75b creating the net drainage of Rs51b. The auction witnessed a sequential decline in cut-off yield with highest participation in 12M paper. Highest rate cut was witnessed in 3M paper by 22bps to 11.56 per cent followed by 6M and 12M paper by 20bps and 16bps to 11.63 per cent and 11.73 per cent respectively. Downward shift in curve of secondary yields also communicates stance the monetary authorities may opt in the upcoming MPS.
The central bank announced a new schedule of monetary policy review citing inclusion of preceding month’s inflation data in overall assessment as a core reason with MPS to be held on February 11, 2012. Ease-off in inflation and trend in market yields have ignited the hopes of further DR cut in the upcoming MPS to propel the growth engines. However such a move remains contentious with 4.97 per cent FYTD depreciation of PKR against greenback and monetization owing to heavy government borrowing. For the weekending January 13, 2012, government retired fund resulting in contraction of NDA while foreign outflow caused decline in NFA whilst expansion in M2 decelerated to 4.28 per cent FYTD basis, said Salman Vidhani at HMFS.
