“The market is all set to cross 12,000 points on the back of unexpected cut of 150 basis points in the discount rate,” said Khurram Schehzad, Head of Research at InvestCap.
Earlier, market analysts were expecting a cut of 50-100 basis points.
At the end of the outgoing week on Friday, the KSE-100 Index closed at 11,853.84 points with an increase of 91.87 points, or 0.78 percent, on a weekly basis.
The KSE-30 Index surged by 126.14 points, or 1.12 percent, on week-on-week basis to 11,366.73 points.
Listed companies, which were built, extended and or operating on banks’ loan will fuel the rally.
So many companies in cement, fertiliser, textile and energy sectors are operating on bank’s financing. Engro Fertiliser and DG Khan Cement are two notable companies among those leveraged companies.
Schehzad said that the market might see some profit-booking, as well during the next week, but it is strongly believed that the KSE-100 Index would sustain the 12,000 points level and consolidate above this level if nothing big unexpected happen on the economic and political fronts.
“Today’s cut in the discount rate shows that the State Bank of Pakistan is willing to reduce the rate further, depending on other economic indicators. The reduction in the rate would convince banks to leverage credit to the private sector, which would help the companies listed at the KSE to perform better.”
A KASB Securities’ report said that apart from a significant decline in the discount rate, the recent increase in car prices by auto-makers (Indus Motor and Pakistan Suzuki), offers an accumulation opportunity for both the stocks.
“They have historically outperformed the broader market after price hikes.”
Other scrips, which warrant the brokerage house liking, include a mixture of growth and value plays, Pakistan Petroleum Limited, Arab Petroleum Limited, Pakistan State Oil, Oil and Gas Development Company, Pak Oilfields, Fauji Fertiliser Company, Kot Addu Power Company, Lucky Cement and Pakistan Telecommunication Company.
“These are the names with sound fundamentals and attractive stories.”
The average volumes of the outgoing week dipped by 9.3 percent to 75.5 million shares. On the contrary, the overall market capitalisation improved by Rs23 billion during the week to Rs3,126 billion.
The market started the week on a negative note, but later picked up steam with Tuesday being the highlight of the week, where the market jumped by 1.92 percent in a single session.
“The remainder of the week saw the market sputter amid profit-taking as domestic politics and global economic uncertainty overshadowed deescalating tensions between the United States and Pakistan; and expectations of discount rate cut in the monetary policy.”
Foreign investors, however, sold stocks worth $2.7 million this week against an outflow of $7.3 million last week.
Fertiliser stocks were the star performers with Fauji Fertiliser Company increased by 5.27 percent on weekly basis, Fauji Fertiliser Bin Qasim was up by 2.86 percent and Fatima Fertiliser rose by 4.14 percent on week-on-week basis following Engro’s decision to hike urea price.
Select cement such as DG Khan Cement rose by 9.8 percent on weekly basis and remained in the limelight due to excitement regarding the monetary policy and Bhasha Dam.
Local politics also grabbed attention mid-week as the PPP-MQM patch up was completed and the latter agreed to rejoin the coalition government
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