Foreign buying provides boost to equity market

LAHORE - Foreign buying in oil and banking sector along with the recovery of rupee in the open market eased off investors concerns, providing the much needed boost to the equity market. Overall, the KSE 100 index remained relatively flat at 9,626 level, down only by 0.33 per cent or 32 points, as it recovered from the losses posted in the first three trading sessions. Trading volumes, however, remained depressed, as they averaged at 129 million shares against 141 million shares last week.
Experts are of the view that foreigners remained net buyers in the market, accumulating shares worth $24 million - 21 weeks high level compared to 1.6 million of the previous week. Banks also accumulated shares worth $3.7 million, where as cos emerged as net seller of $15m. A substantial portion ($7m) was contributed by an off-market transaction in OGDC while Friday also recorded heavy net inflow of @10m into the local bourses.
The market ended on a positive note despite weak sentiments in the start of the week due to uncertainties surrounding CGTs modalities and appointment of the new finance minister. NBP and UBL result announcements were the key highlights of the week, both posting an EPS of Rs16.92 and Rs8.26 respectively.
ANL disclosed its ability and intention of meeting its obligation of preference share redemption of Rs330mn. This also allowed the approval of the IPO issue for ANLs fertilizer subsidiary, Agritech Limited, to be held on 11th-13th March, 2010. The company has already raised Rs1.87bn in private placements while another Rs500mn is targeted to be raised via the IPO issue, alleviating the concerns on corporate debt default.
Over USD400mn in reimbursement claims by Pakistan under the Coalition Support Fund (CSF) for 2008 have been rejected by the US because of new guidelines requiring 'enhanced oversight and accountability.
Sana Hanif, a stock market expert, observed that initially, uncertainty regarding modalities of CGT and appointment of new finance minister caused investors to stay on the sidelines. This is reflected from overall low level of volumes witnessed in the outgoing week. However, Rupee appreciation by over Rs1/US$ in the open market, mainly on the back of improved foreign reserves (up US$430mn WoW to US$14.8bn) eased off investor concerns regarding further rupee depreciation, helping the market to recover. In the outgoing week, NBP & UBL announced their 2009 earnings which were above market expectations. NBP posted strong earnings of Rs18.2bn (EPS: Rs16.92) along with a cash dividend & bonus issue of 75% & 25% respectively, leading to a flurry of activity in the scrip (up 5%WoW). Investor interest remained intact in the scrip as it announced earnings growth of 10.3% (EPS: Rs8.26) and a cash dividend of 25%.
The outgoing week also witnessed the approval of due-diligence for RBS acquisition by FABL and Egypts EFG Hermes Bank while a merger of Nimir Resins and Descon Chemicals was also announced. In-line with forecasts, NBP posted an EPS of PKR16.9 for CY09 (+18% YoY) while UBLs EPS of PKR8.3 (down 10% YoY) came above our expectations.
Experts maintain a positive outlook on the index however they reiterate the need for thorough stock selection. PPL, PSO, ACPL and HUBC are maintained as our high conviction ideas while LOTPTA continues to be our favorite pick out of the penny stocks.
With immediate resistance and support defined in between 9,680 - 9,730 and 9,570 - 9,520 respectively, experts suggest that participants should opt for short term trading in blue chip stocks only.
Experts maintained that the confidence building measures being taken by the government, including the meeting of interior minister with the business community, expected address of the PM to the nation, infused hopes regarding announcement that will help stabilize political temperature besides addressing various issues. On the last trading day the renewed buying interest was witnessed in front line and side-board stocks, mainly in the stocks, those have witnessed massive price erosion in previous sessions. New investors both from corporate and retail participants infused confidence amongst day traders. Increase in number of investors will make even the specific group stocks less manipulative.
Commenting on the last trading day, experts believe the charm has enough room left which can help bulls gain further territory towards 9,550 - 9,580. Should the said levels be taken out impulsion towards 9,613 - 9,650 could be on the cards.
Although in the short term prices are likely to travel north, while the bears are likely to retaliate at aforesaid levels. Therefore, stops should be placed strictly while profits should be booked at given target levels.