KARACHI: The KSE index augmented 92 points during the short week, just before Eid, while the average volume stayed over 69 million shares. Following Eid holidays, investors and traders were initially inexorable as the index registered a gain of 240 points at pace.
However, the energetic bull suddenly lost substantial energy as the index was unable to sustain its level whereas profit taking by investors resulted in a loss of 70 points before Friday’s minor gain of nine points. Foreign fund managers surprised investors with a single day investment of $7.1million, while market statistics revealed inclination of foreign investors towards the E and P sector.
Month to date FIPS data exhibited a net inflow of $37.54 million, while the preceding two weeks saw the equity market receive $15.8 million. Average daily volumes during the current month improved substantially to 125.8mn shares in contrast with year to date volume of 119.5 million. Reformed GST remained in the limelight as political warfare heated up with opposition parties’ continuous opposition of the bill.
However, eventually the ruling party was able to pass the bill from the senate. Apart from stern opposition, legal and technical glitches were also highlighted by media experts. In addition to the reformed GST, flood surcharge of 10 percent was also approved by the senate.
According to news reports, GoP borrowing surpassed Rs 800 billion mark while exports for October 2010 hit a record $1.98 billion. Monetary policy is also expected to be disclosed on November 29, 2010 and majority of the analysts anticipate an upward adjustment of 50bps in discount rate in the light of economic concerns. Monthly inflation is also anticipated to surpass the preceding month level of 15.33 percent.
The preceding week and a couple of trading sessions before Eid saw Habib Metropolitan Bank as the major gainer with an upward price adjustment of 17 percent. Oil sector i.e. OGDC, PPL and POL dominated the market performance in the period under review.
ABL outshined its banking peers, while the remaining top four banks posted minor gains. Bilal Asif, a market expert, stated that the upcoming week is likely to be impacted by the monetary policy decision which is expected to be declared on Monday, while the absence of any major triggers may result in volume shrinkage.
The central bank is also likely to the raise the discount rate by another 50bps to 14 percent owing to persistent government borrowing, monetisation, negative real interest rate and stubborn inflationary pressures with a recent rise in international commodity prices and expected imposition of reformed GST.
Government borrowing from the SBP has swelled by Rs 182 billion during the fiscal year against the retirement of 0.4 billion in the same period of preceding year, while 6M KIBOR has risen by 10bps during the month to mid quote 13.20 percent. The proxy for risk free 10 years PIB is trading at 13.85 percent in the secondary market.
Market yields are likely to climb further in the intermediate generating investor participation in longer tenor, said Salman Vidhani at Habib Metropolitan Financial Services.
