Analysts suggest caution as KSE touches 9-month high

Posted on 02.11.07 by StockPK Team @ 2:24 pm    

The outgoing week (February 06-09) is the seventh in sequence of closing the Karachi bourse on positive note. However, the process of much awaited technical correction was initiated on weekend.

KSE 100-Index moved ahead by another 255.01 points on week-on-week basis and closed above nine-month high record at 11,844.65 points despite of the bearish resistance it faced during week.

To calculate the future movement of the benchmark, it is worth mentioning here that 100-Index breached through 12,000 points on aggressive buying on Friday, but market failed to sustain this level. Corrections reversed the earlier gains after touching 12,047.72 points peak level this week.

Moreover, 100-Index has surged by 1,804.15 points or approximately 18 per cent in calendar year 2007 to date.

On the other hand, free float shares based 30-Index breached through 15,000 points level for the first time in its brief history, adding another 408.34 points during the week and closed at 15,023.93 points. It hit the intra week high of 15,336.87 points in the last twin-trading session at KSE.

Market on Monday (February 05) remained closed on account of Kashmir Day. It saw only four sessions all were volatile. Out of four, first three sessions of the week managed to close in green, while weekend twin-trading session closed in red.

“A deeper correction is expected in initial sessions of coming week that is still overdue, but in the long run market would sustain well above 12,000 points level in the ongoing financial results announcement season”, said Ahsan Mehanti of Shazad Chamdia Securities.

The daily turnover in the ready market remained above nine month high in their respective single sessions. The average daily turnover in this market increased significantly from 380.270 million shares of the last week to 433.815 million shares this week, therefore, the total turnover of the proceeding week stood at 1.735 billion shares.

Prominent buying in telecom and cement sectors besides uploading of other stocks injected another Rs69 billion in overall market capitalisation that reached to Rs3.226 trillion this week.

Ali Khizar of JS Research observed that unlike last few weeks, where heavy weight E&P and Banks rallied the market, telecom and cement sectors were the main drivers of the indices this week. Although the oil prices rebound to $60 per barrel in the international markets, E&P sector under performed the market by 3.1 per cent. PTCL was the best performer amid foreign buying and gained 12 per cent, thereby, leading the sector to outperform the market by 9.3 per cent, he added.

In cement, sector record high dispatches and rising prices kept the investors on the toes and the sector outperformed the market by 7.6 per cent. Moreover, PSO remained hot on the basis of news on the privatisation front as the scrip price has soared by 4.5 per cent on week on week basis, he added.

Muhammad Sohail, Head of JS Research, said, “It is hard to measure the investment strategy of foreign fund managers in conformity with sentiments prevailing at Karachi bourse. But persistently increasing inflow of foreign portfolio investment, that surged by another $110.055 million only in February 2007, gave a guess that they would continue to invest here.”

Special Convertible Rupee Accounts (SCRAs), which is the foreign portfolio investment account managed by SBP, reached record high at $491.693 million from July 2006 to date, according to SBP website.

Moreover, All Pakistan Cement Manufacturers Association (APCMA), at a meeting with Federal Minister for Industries and Special Initiatives, Jehangir Tareen Khan, fixed average retail price of cement at Rs260 per 50 kg bag on Saturday, would play its role but positive, another analyst said.

Cement price at preset stood at Rs275 per bag that surged from Rs180 per bag in a short span. Rs15 per bag is not a deeper cut and is not likely to affect market sentiments badly, he added.

The Continuous Funding System (CFS) value showed a marginal decline of Rs300 million and was recorded at Rs51 billion on Friday. This shows that genuine buyers are entering the market replacing the weak holders. Average CFS rates on the other hand, was recorded at 17.6 per cent - up by 103 bps.

On the future counter, open interest in February’s contract swelled by 18 per cent to Rs9.3 billion, whereas, cost of carry was down by 190bps to 3.2 per cent at the end of the week. Thus, some shifting from CFS to futures was also observed.

Source: The News