Rs20b equity market fund brings bulls back to stock market
CHI - Karachi Stock Exchange, which was on downward trend over the last three weeks, managed to close the outgoing week on positive note.
The announcement of Finance Minister to establish Rs20b equity market fund gave much-needed boost to the stock market and the announcement of governor of State Bank of Pakistan (SBP) regarding the extension of the deadline for the reduction of total stock market exposure for banks (not exceeding 50% of their equity), stimulated activity in the banking sector.
The KSE-100 index witnessed a recovery of 797 points or 7.8 per cent during the week and closed at 11,032 points.
Free float KSE 30-share index moved up by 1,118 points ort 9.8 per cent, closing at 12,525 points. Average daily volume increased by 22 per cent WoW to a level of 140.5mn shares.
Foreigners, however, remained net sellers in the market as depicted by NCCPL data. As per the data, net foreign selling during the week stood at US$18.2mn. On year to date basis, cumulative selling in 2008 to date stands at US$301.9mn as of July 24, 2008.
The market capitalization increased by Rs.243 billion on week on week basis and stood at 3.3.439 trillion at the weekend.
During the outgoing week, SBP governor and Finance minister visited KSE first time since they resumed their portfolios.
The visit of Finance minister Naveed Qamar was highly applauded by the brokers and investors of the stock market and their happiness was seen in the performance of stock market on Tuesday when Finance minister came to the stock market, the KSE-100 index jumped up by 410 points, on the back of his announcement establishing Rs20bn equity fund. While the visit of SBP governor to the stock market didn't manage to give good impression or fail to works as a confidence-booster, as the investors and brokers were expecting some respite in the discount rate and participation of SBP in proposed equity fund. But the governor had poured cold water on the expectation of the investors and brokers by signaling further increase in discount rate.
However, extension in the limit of bank stock market exposures to June 30, 2009 has speed up activity in banking sector.
"All eyes are now on SBP's coming monetary policy for the future outlook of the market," analysts said.
Analysts believe the central bank has conveyed its hawkish stance to the market. In the upcoming monetary policy statement on July 29, 2008, they expect an increase of 100bps in the discount rate and such move of the SBP may dampen the sentiments of investors.
Analysts said that expected increase in discount rate in the coming monetary policy of SBP has prompted investors to book profits on the last trading day of the outgoing week, as the KSE-100 index fell 124 points on Friday. During the week, buyers remained active almost in all key sectors. Banking sector with a gain of 16 per cent WoW remained the top performer followed by Cement sector which registered a gain of 8.7 per cent. On the other hand, strong buying was witnessed in the E&P sector during initial trading sessions, however, correction in international crude oil prices kept the sector under pressure in the later part of the week.
Analysts said that conversion of equity opportunity market fund into open-ended fund was a good move as it will pave ways for more investment by the participation of general investors in future.
Analysts were of the view that financial result season is in full swing, positive results from the oil and banking sector are expected to drive a rally in the market.
Total CFS investment (CFS + CFS MKII) declined slightly by 69bps WoW to end at Rs27bn. CFS and CFS MKII contributed Rs9.3bn (-41per cent WoW) & Rs17.7bn (+56 per cent WoW) respectively to the total CFS investment. CFS and CFS MKII rates witnessed a divergent trend with CFS rates rising by 20bps WoW to 15.25%, while CFS MKII rates dropped by 74bps WoW to 14.67 per cent. The top-5 scrips by CFS MKII investment were AHSL, NBP, POL, JSCL and ENGRO, whose cumulative share accounted for 40 per cent of total investment.