Market remains sluggish (05092008)

LEADER REPORT
KARACHI: Market remained sluggish as index posted minute gain on Thursday. Index initiated in the negative zone and continued in the same band throughout the day while minute recovery was witnessed to push it over the green line.
The benchmark Index KSE-100 closed 0.11 above the previous levels to close at 9,239.26 points. Volumes continue to remain stressed as only 24.8mn shares were traded during the session. Advanced and Decline both remained at par as 55 scrips gained and lost values while 104 scrips remained at their previously prevailing prices.
Foreign investor interest in the local equity market may seem to have recovered. First three days of September has witnessed an increase in Foreign Portfolio Investments to have grown by over USD1.3mn suggesting an increase interest of foreign investors. On Sept 3rd, the FPI numbers stood at USD144k (PKR10.9mn). With rewarding equity values, added political steadiness post election could result in major turnaround for the local bourses. Also, the local currency slides to close at Rs76.95 before seeing a low of Rs77.45 owing to increased oil payments.
Banking sector remained in the depressive mode, primarily based on the selling pressure in scrips of MCB as it lost Rs3.96 while other top tier banks remained at their last closing levels.
The sector has remained under the limelight, during better days with better performance of the sector.
The sector is currently going through the consolidation phase as the entire sector has seen depressing performance. Due to high provisioning against non performing loans, banks have posted decline in earnings.
Increase in policy rate to 13 percent and freezing the floor level of the saving rate to 5 percent has shrunk the spreads for banks specially the second and third tier banks.
Fertilizer sector also witnessed some selling strain as ENGRO posted minor loss to decrease by Re0.56.
Moving ahead, similar depressive scenarios might be witness in the short term, however, all major scrips ENGRO, FFBL, FFC, are expected to remain better backed by fundamentals. To promote higher usage of DAP, rise in DAP subsidy is expected to be a major push for ENGRO and FFBL that are holding large DAP inventories.
Going ahead, the Sept 6th elections remain the primary matter of concern for investors, both local and foreign.
The election of PPP candidate is expected to be most likely outcome and this may instill stability on the political front making PPP the primary ruling party, bringing consistency in the decision making process.