Lingering economy keeps investors out (12092008)

LEADER REPORT
KARACHI: Investors stayed largely sidelined as the economic indicators continue to show slowdown. Index remained under stress throughout the day on Thursday. The approval by the US to its forces to attack Taliban installations in the country’s Northern Region, formed further pressure on the already depleting investor confidence.
KSE-100 index lost 52.29 points to shut at 9,263 point with volumes again shrunk to 13bn shares against 21mn shares traded on Wednesday, showing investors opting to remain sidelined from the local bourses. Only 26 companies remained favorable while 79 companies lost weights.
According to the Federal Bureau of Statistics, the Jul-Aug trade deficit swelled to USD3.522bn showing a YoY rise of 47 percent. Even though both exports and imports witnessed declines, however, the decline in imports remained nominal when compared to export declines. Further, the government borrowing during the first 26 days expanded by 41 percent. Foreign reserves have fallen below USD9bn while the Pak Rupee closed on Thursday at Rs76.80 against the greenback, showing fragile economic situation. Furthermore, the outflow of FPIs from our local equity markets is on the rise as a net selling of Rs155mn was seen during the previous trading session.
Banking sector witnessed another depressive session as the SBP's revision of MCR limit for banks and DFIs was moved upwards to Rs23bn which should be met by Dec 31, 2013 in phases whilst the requirement of 10 percent of CAR to be maintained from December this year, is expected to consolidate the banking sector. Also, risk management systems of banks are anticipated to improve together with expectation of Merger and Acquisitions of smaller banks as the top five banks are already in position, in term of excess reserves, to raise their capital to the minimum requirements. This will result in issuance of rights and bonuses making the top banks attractive for favorable investments.
Favorable news for the economy was the likelihood of receiving first tranche of USD500mn out of the total of USD1.3mn loan from ADB by the end of the September while IMF issued letter of comfort to facilitate such release from ADB. In addition, the proposed buy back of shares by major companies including NBP and JSCL, as well as, the approval of buy back by OGDC is anticipated to revive slight stability into the market moving ahead.


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Minor recovery as volatility persists in KSE (11092008)
LEADER REPORT
KARACHI: Index on Wednesday remained volatile throughout the day. Market initiated in the positive band, however, some pressure was seen in the mid session. The KSE board decided to keep the floor mechanism in place to provide continuous support to market until the next meeting which is scheduled for Sept 25th.
KSE-100 Index recorded minor gains of 36.06 points to close at 9,315 levels while volume saw rise to over 21mn shares traded against 11mn during the last session. Advance to Decline ratio favored the bulls with 69 scrips gained versus 35 scrips losing weights.
With depressive investor confidence, the capital market has seen ongoing capital flight from the country during the past few months owing to weak political conditions, fragile economic situation and precarious law and order situation. Currently, as the political uncertainties have been stabilised, the economic slowdown has put brakes on foreign portfolio investments. FPI during the month have shrunk by over Rs830mn so far. Further, the country's foreign reserves falling below USD8.9bn, the economic situation looks bleak. However, the current government is putting its efforts to procure foreign investment through attracting foreign investments in energy projects, as well as, offloading of its stake in various companies including OGDC, may provide some support to the economy. On the CFS desk 16mn shares were traded during the session with value of Rs807mn, with net open position of Rs17bn on Sept 9th.
Fertilizer sector saw gained on the back of increase in subsidy for DAP to Rs2,200 per 50kg bag while the price is fixed a price ceiling of Rs3,050. ENGRO and FFBL both are expected to make huge returns owing to their high inventories of DAP. Banking and Power also witnessed minor gains.
The expected buy back of shares by various blue-chip companies, is expected to formulate a positive trigger for the market as OGDC has announced the proposal of buy back of its share in a meeting to be held today (Sept 11th) while NBP and JSCL also have scheduled meetings to discuss buy back of their respective securities scheduled for Sept 12th and 27th, respectively. Slight confidence building could be seen on such decision by companies with some support from institutional buyers.