Bulls continued to dominate the proceedings from the onset of the week as the benchmark gained 302 points with in two trading days as KSE-100 index reached 12,284 points. Volumes were fairly encouraging as average daily volume for the week stood tall at 169.6mn shares. From the onset of the 2012 the benchmark has gained 7.8 per cent with considerably encouraging volumes.
Individual investors are returning towards the market after the announcement of relaxation of CGT announced by the Finance Minister. Furthermore majority of the results declared by the corporate sector were fairly encouraging. Majority of the investors are expecting a discount rate cut in the upcoming monetary policy statement due on Saturday while majority of the analyst community believe SBP will maintain the status quo.
In a recent economic review of Pakistan by IMF stated “Pakistan’s near and medium term prospects are challenging and growth would remain too low to absorb the large number of new entrants into the labor force. In FY12 the real GDP growth is projected at 3.4 per cent and average CPI inflation at 12 per cent.
Deterioration in the current account balance due to lower cotton/textile prices and a sharp slowdown in remittances growth, continued difficulties in attracting external financing and the beginning of repayments of IMF will likely to put further pressure on the balance of payments this year, with reserves projected at USD12.1bn by end of FY12”. ‘We agree with majority of the projections of the IMF except the GDP growth and remittances flow. Hopefully the government will be able to capitalize funds from 3G license auction, PPL public offering and Etisalat payments, said Bilal Asif at HMFS.
In case all the above mentioned transactions materialized; the government will be available with ample funds to manage the current account and budget deficit. During the week PSO results was announced which was well below the analyst expectation, hence the stock prices turned volatile. HUBCO results can be considered as a surprise package as the stock announced a dividend of Rs 3/share. Major banking stocks were fairly active as annual results are expected to be announced soon. NBP gained on the back of healthy dividend announcement while second tier banks including AKBL and FABL also registered healthy gains. ‘We believe benchmark may continue its upward journey in the upcoming days along with minor hiccups,’ he added.
Money Market: During the week SBP conducted T-bill auction where it raised Rs 146bn against the target of 125bn creating the net drainage of Rs 26bn. After decline in yield in the previous two auctions, cut-off rates climbed back up as state bank’s quarterly review created further excitement over the upcoming MPS. The auction witnessed rise in cut-off yield across all tenor with highest participation in 6 months paper.
Highest rate cut was witnessed in 6 months paper by 18bps to 11.81 per cent followed by 3 and 12 months paper by 16bps to 11.74 per cent and 11.89 per cent respectively. Albeit ease-off in inflation have ignited the hopes of further DR cut in the upcoming MPS,
‘We expect SBP to maintain status-quo as further DR cut remains contentious with unwavering monetization, depreciation of PKR against greenback and rise in energy product prices to likely cause inflationary pressures to resurface as low base effect pan out,’ said Salman Vidhani at HMFS.
For the week ending Jan 27, 2012 GoP retired funds, lowering outstanding dues toward SBP however foreign flows strengthened NFA whilst money supply remained unchanged at
4.25 per cent.
