Weekly Review: Index gains 616 points as clarity emerges

Observer Report

Karachi

Stocks rebounded after two weeks of decline, with the benchmark KSE 100-share index rising by 616 points, or 1.3 per cent, to close the outgoing week on Friday at 49,624.
After remaining under pressure in the previous week, due to various reasons, stocks bounced back in action Tuesday onwards before profit-taking trimmed gains on Friday. Asset values remained volatile during the first half of the week with hefty sell-offs amidst crackdown of regulatory watchdog on some brokerage houses who were allegedly involved in misuse of in-house financing, fraud and deceptive business practices.
However, the joint press conference by Securities and Exchange Commission of Pakistan (SECP) and Pakistan Stock Exchange (PSX) aimed at pacifying investors’ concerns over crackdown on brokers helped instill confidence.
The market eventually recovered after progress and development on the MFS product.
Moreover, news of six blue-chip companies – Habib Bank Limited (HBL), Mari Petroleum, Searle Pakistan, Engro Fertilizer, Fauji Cement Company and Nishat Mills Limited – being included in the Financial Times Stock Exchange (FTSE) global equity index further helped improve market sentiments even further.
HBL (+4.6per cent) was the driving force in the index recovery, alone adding 160.6 points to the index as investors cheered robust loan growth the bank reported in its annual 2016 financial results.
On the sector front, refineries gained 7per cent week-on-week as Attock Refinery Limited (+9.6per cent) rallied on the back of commencement of EURO-II diesel supply to OMC’s, while engineering (+3per cent) was supported by CSAP (+13.7per cent) in hopes of further line-pipe contracts.
On the flipside, foods declined 2per cent as heavyweight Nestlé shed 4.7per cent week-on-week, while some profit taking was witnessed in cements (-1per cent).
Minor contribution came in from Sui Northern Gas Pipeline (+9.9per cent) and Millat Tractors Limited (+8.8per cent), contributing 51.5/48.1 points, with the former rallying over news of upgradation of pipeline infrastructure while latter came in limelight over anticipation of robust monthly sales.
Average volume traded decreased by 6.4per cent week-on-week while average value traded decreased by 1.0per cent week-on-week.
Foreign investors continued their selling streak with a net outflow of $32.7 million during the week against a net sale of $4.8m in the previous week.
Major foreign buying was seen in oil and gas exploration companies, whereas major selling was seen in the cement sector. Among local participants, corporates and banks absorbed much of the foreign sell-off amounting to $21.03m and $13m, respectively.
WINNERS OF THE WEEK
PICIC Growth Fund is a closed-end fund registered in Pakistan. The fund’s objective is to generate capital growth. The fund invests in stocks listed at the stock exchange.
Crescent Steel & Allied Products Limited manufactures steel-lined pipes and multi-layer pipe coatings, which are used for water, oil and gas transmission. The company also has a cotton division that manufactures cotton yarn. Indus Dyeing & Manufacturing Company Ltd manufactures and sells yarn.
LOSERS OF THE WEEK
Feroze1888 Mills Ltd manufactures and sells a wide range of cotton towels and fabrics.
Nishat Chunian Limited manufactures and sells yarn and fabric. The company operates spinning, weaving, dyeing and finishing units.
Shifa International Hospitals Limited establishes and runs medical centers and hospitals in Pakistan. The company’s clinical services include medicines, paediatrics, surgical, obstetric and gynaecology, dentistry, rehabilitation services and ophthalmology.
Outlook: With the results season almost reaching its conclusion and the noise over in-house leverage dying down, the investor focus would shift to the judgment over the Panama Papers hearing. Market pundits expect trading to remain range-bound amid unimpressive volumes.
However, if a new leverage product is introduced and if a substantial amount of proceeds of the divestment of a 40pc stake in the PSX passes on to stockbrokers and finds its way into the stocks, it could boost positive sentiments for the market to retest the previously attained all-time high level of 50,886.80 points.