The KSE-100 index displayed resiliency for the second week in a row to close at a gain of 67 points (+0.6% WoW). Despite continuing economic turbulence internationally over the on-going debt crisis and economic concerns over the impact of flooding on the local front, investor sentiment remained strong with five consecutive sessions of the index closing in the positive. However, investor interest seemed dull with a sharp drop in average daily volumes to 50mln shares (-40% WoW) explained by little activity seen by foreign investors who remained net sellers of USD 1mln. Global markets continue to face pressure with speculation over the fragile state of the financial system, especially in EU. This was substantiated by Moody’s collective downgrade of French banks, indicating high likelihood of a sovereign downgrade to follow. However, markets witnessed a slight rebound in the latter half of the week amidst news flows of currency supportive measures by EU central banks to their neighboring struggling economies. Nevertheless, on the local front, attractive valuations and good corporate results offering high dividend yields shielded the KSE-100 from the adversities seen internationally. Accordingly, the market outperformed regional peers by 1.8% collectively in the outgoing week.
Stock Specific Activity
Key results announced this week include Attock group of companies with their FY11 results. APL posted earnings growth of 18% YoY mainly on account of higher oil prices on a comparative basis. The company announced a healthy payout of PKR 30/share – above analyst expectations – thus enabling the stock to outperform the KSE-100 index by 3.6%. POL’s earnings grew by 45% YoY owing to the successes in exploration activities and better than expected flows from its main operatings wells. However, this growth failed to excite investors as the scrip underperformed the benchmark index by 0.8%. A similar case was seen in ATRL whos impressive profitability did not seem to stimulate activity and the stock closed down a substantial 10% WoW.
Forward Looking Expectations
With the corporate result season almost over, we expect slight a mulled period in terms of activity over the coming week. Sentiments are expected to remain sensitive to international developments, especially the performance of Asian markets as this is likely to direct the flow of foreign investment in the country. Mixed macroeconomic fundamentals were released during the week; fx reserves declined on the back of committed debt payments and the current account deficit widened to USD 75mln. On the other hand, remittances continued their record breaking trend crossing USD 1.3bln and lower yield rates indicate confidence over inflation control. We expect further macroeconomic data to be released during the coming week, impact of which would be a key factor in the market.
