Dull week ends flat on KSE, but IMF

Sunday, May 16, 2010
By Javed Mirza

KARACHI: After lackluster trading during the last five trading sessions, leading analysts expect some short-lived excitement on the Karachi Stock Exchange next week on the back of International Monetary Fundís (IMF) approval of $1.13 billion tranche for Pakistan.

“We will witness some excitement next weeks as the long-delayed IMF tranche for Pakistan has finally been approved,” said Samra Ansari, an analyst at InvestCap. “But the excitement will be short-lived as uncertainty regarding the value-added tax (VAT) and capital gains tax continues to haunt investors.”

Last week, trading remained lacklustre amid low volumes as investors remained on the sidelines as they waited for the monetary policy review and government’s decision regarding controversial taxation measures.

The past week saw global indices falling to lowest levels in the year because of the Euro zone debt crisis. It also impacted the local market, which is being driven by foreign investors, who too went for a wait-and-see approach.

Dealers said that the benchmark KSE 100-share Index moved in a narrow band, but the market performance was better compared with the previous week. The KSE 100-shares Index closed 10271.71 with a gain of 0.24 points. KSE-30 Index closed at 10341.30 with a gain of 0.38 points.

The average daily volumes declined by 28 percent to 94 million shares compared with previous week’s levels of 130 million shares.

“Fears regarding European credit crisis spilling in, rumours of upcoming taxation, and pre-budget apprehension have kept investors nervous,” Ansari said. “Despite some recovery in the regional markets, political bickering earlier in the week between coalition parties in Sindh prevented investors from taking fresh positions.” Dealers said that budget fears and rumours of Pakistan not being included on the MSCI led to midweek sell-offs. Buying before weekend restored the benchmark 100-Index to previous week closing levels.

Foreigners continued to dominate the market, purchasing shares worth $6.6 million. Buying spree was sluggish as compared to year-to-date (YTD) weekly average of $12.4 million. Banks emerged as major net sellers during the week, offloading shares worth $7.7 million.

Open interest position on the futures counter increased by six percent to Rs1,020 million during the week. The futures spreads, at the same time, also rose by 9.2pps to stand at 12.65 percent indicating strength on futures counter.

Futures’ volumes were down by 29 percent. Top-5 scrips including OGDC, BAFL, PSO, POL and ENGRO cumulatively represented 54 percent of total open interest during the week.

KASB Research said that the decision on Value Added Tax (VAT) from July 1 and six percent power tariff hike could give near term shape to market sentiment.

“Should the same go smoothly, the next key date to pinpoint is May 24 where SBP is due to announce its Monetary Policy and resultant clarity on monetary stance will be a key to market sentiment. Likewise, any further news flow on implementation of capital gains tax will also be eagerly awaited,” said KASB.