Weekly review: Bourse witnesses massive mood swing

The stock market took off to a great start by gaining more than 268 points in the first two days but unsettled Pak-US ties and budget frights took the bourse downwards in the next three days.
“Resumption of supplies to Afghanistan remained seal and no development has been inked so far. As a result investor sentiments were depressed and the index closed below the psychological barrier of 14,000 points,” says a KASB Securities research note.
The Karachi Stock Exchange’s benchmark 100-share index rose 0.49% to close at 13,925 points during the week.
Key economic targets were disclosed during the week for the upcoming financial year that kept investors on the sidelines. GDP growth target has been set at 4.3% while inflation target is at 9.5% for fiscal 2013.
Amongst sectors, fertiliser was the hardest hit over reports of potential increase in a development cess, a type of tax, on feedstock gas by 52% to Rs300 per mmbtu as producers’ ability to pass-through the impact of PRs131 per bag remains uncertain. “The move will dampen industry earnings with Fauji Fertilizer Company earnings estimated to fall 7.5% in fiscal 2012 in a worst-case scenario,”says the note.
Cement price hike in the north of the country to Rs425-430 per bag eased pressure on the sector. Lucky Cement and DG Khan Cement were among the key laggards last week.
Average traded volumes merely increased by 8.4% to 156mn shares, while average traded value rose by 3.6% to $68mn.
Net foreign investment came in at a solid $12.3 million compared with last week’s $6 million outflow.
On the macro front, the rupee lost 1.2% against the dollar to a new record low in the inter-bank market during the week to close at 91.8 to the dollar.
Moreover, a string of concerning news flow including current account deficit of $313 million in April and delay in patching up of Pak-US ties sealed the pressure on currency. To add to the pressure, a US Appropriations Panel approved a proposal to cut aid to Pakistan by 56% to $1.0 billion for financial year 2013.
With the announcement of federal budget on June 1, the market is expected to remain cautious in the upcoming week particularly awaiting any potential sector-specific developments.