KARACHI – The index sustained the upward trajectory despite enormous political warfare among political parties. PML-N has tried to dictate their terms and conditions to the government which can be termed as a face saving effort by the so called opposition party. Killing of governor Taseer on Tuesday led to further complications.
During the due coerce of time, index gained around three percent or 366 points, with an average daily volume of 155 million shares, well above the preceding year’s average volume. Foreign investment during the week clocked at $12.01 million, which was the driving force behind the bullish rally. It seems that local market punters followed by fund managers were actively participating in the market.
The showdown, which started following an increase in petroleum prices, has nearly hit the finish line on Friday. The ruling party was in deep trouble after a coalition partner left the ruling alliance. The prime minister tried to rescue the government and traveled extensively to meet the leaders across the country, but the same old ally came back to the support of the government after reduction in petroleum prices.
Despite tough economic conditions, government will have to bear the oil price differential, which is likely to curtail the resource kitty. Furthermore, the only option left to finance the burgeoning deficit would be via printing currency notes, which is highly inflationary and it would have long term repercussions on inflation and economic progression. On the sideline, government has raised returns of national saving schemes, which is expected to encourage individuals towards saving and investments. The index heavy OGDC ruled the stock market, as it gained Rs 9.83 to close at Rs 180 per share. The oil sector dominated the week as the OGDC alone contributed 67 percent of the total index gain of 366 points during the week. In addition, POL, PPL and MARI from the same sector were among the gainers.
Meezan Bank outperformed the index followed by HBL, ABL and NBP.
The money supply continued to expand, as it stood at 7.90 percent in the first half of 2011, primarily on account of the expanding NDA. Unabated government borrowing from the central bank, which has escalated by Rs 459 billion during the period, has been the primary driver of growth in NDA. Persistent inflationary pressures, now with an upsurge in commodity prices and burgeoning government borrowing has yet again fueled the expectation of discount rate hike in the MPS to be announced later this year. Benchmark interest rate of 6M KIBOR has jumped by 5bps to mid quote of 13.52 percent since the start of the current calendar year.
Although resilience of rupee is admirable, depicting depreciation by a meager 0.30 percent against greenback since the beginning of fiscal year, covert pressure continued to mount due to the widening inflation differential. Market yields are likely to move further north before retraction. This was a result of the tightening monetary stance and heavy financing requirement of the government, said Bilal Asif at HMFS.
