Political instability to weigh on KSE: dealers

KARACHI: The Karachi Stock Exchange (KSE) is likely to continue moving under the shadow of electoral politics next week, and also on the tone to be set in politics after the Supreme Court hearing in National Reconciliation Ordinance (NRO), said dealers on Saturday.

“All eyes will be zoned in on the political landscape on Monday as the larger bench of the Supreme Court will take up the NRO case and the memo commission will also resume its hearing,” said an analyst at KASB Securities.

The benchmark KSE 100-share index lost 110.89 points, or 0.99 percent, in the week ended on Friday, January 13 and closed at 11,014.46 points. The index had gone below 11,000 points mark and stayed there for two consecutive sessions during the week as well.

The analyst said that politics will likely set the tone for market direction. However, corporate result season, which is hovering around the corner, might take some of the spotlight away from the political noise.

He also advised a close watch on preliminary news flow emerging on the International Monetary Fund’s (IMF) Letter of Comfort, and monetary policy statement to be announced late in the ongoing month of January. “An unchanged policy stance is likely on the cards,” he added.

The IMF’s detailed report will hold the trump card in determining the direction and extent of future sovereign flows and also have implications on the rupee-dollar exchange rates.

“The energy space continues to remain prominent in our preference list, where a blend of attractive fundamentals and undemanding valuations are on display,” he said.

Ovais Ahsan, Head of Equity Sales at Optimus Capital Management also underlined politics as the driving force behind trading at KSE next week.

Investors would continue to ‘wait and see’ the results in electoral politics. They are now expecting actions from opposition parties in the parliament as PML-N might opt for a ‘no confidence vote’ against the ruling party; or they might want PPP to complete its tenure. “In short, investors want peace of mind from political barons,” Ahsan said.

The market may react positively if Federal Board of Revenue accepts the Securities and Exchange Commission of Pakistan’s proposal of changing rules for capital gains tax regime as per stock brokers and investors’ wish, he said, adding that this is a secondary issue for now as changes, if made, would be applicable from July 01, 2012.

He further said that full-year’s financial result of banks should remain attractive next week. Meanwhile, shares of Independent Power Producers (IPP) should also attract buying as they were offering higher yield of up to 17 percent.

Ahsan said that foreigners may also consider reinvesting a few dollars at local bourses as the holiday season has ended in the West. Foreign portfolio investors bought net shares worth $177,457 last week after remaining net sellers for a number of consecutive weeks before this, according to official data.

The average daily volumes fell by 33.4 percent to 28.1 million shares last week from 42 million traded in the week earlier. The market capitalisation fell by Rs27 billion to Rs2,866 billion.

Furqan Ayub, an analyst at JS Global, said that the local bourse remained lackluster last week owing to the political uncertainty prevailing in the country on NRO and memo cases.

SECP proposal to FBR on changing method of collection of capital gains tax at bourses, however, invited buying in the last session of the week.

Both Fauji Fertilizer Company and Fauji Fertilizer Bin Qasim raised urea prices this week, consequently outperforming the market by five percent and four percent, respectively.

Amongst other blue chip stocks, MCB Bank and Lucky Cement outperformed the market by a respective three percent and two percent on the back of attractive valuations, he added.