June 08, 2012 (JS Research)
Investors adopted a cautious approach through out the week despite a positive budget for the capital markets. Concerns related to continued diplomatic tension between the US and Pakistan , rupee depreciation, weakness in oil prices and monetary policy expectations weighed heavily on the minds of investors. Consequently, the oil heavy KSE-100 index was down 2.3%WoW to close at 13,559 level. Average volumes also reflected the limited interest in the market as they plunged by 32%WoW to 95mn shares. Foreigners too were downbeat as they sold shares worth US$16.8mn.
Tension between US-Pak remains unresolved
The US did agree to reimburse US$1.18bn to Pakistan on account of CSF but the issue of reopening of NATO supply routes remains unresolved. The stalemate was further fueled on the difference of opinion on drone strikes and the Salala tragedy. A senior US official is expected in the country next week to break the deadlock between the two countries on reopening of NATO supply routes.
SBP keeps discount rate (DR) unchanged
As per market expectations, the SBP adopted a wait and see approach by keeping DR unchanged at 12%. In its Monetary Policy Statement, SBP highlighted managing external and fiscal pressures as key concerns in the immediate term. Moreover, the SBP also emphasized the importance of reviving private investment in the economy and the need of fundamental reforms to turnaround the economy.
Individual stock performance
News of restoration of gas supply to Engro’s Enven plant kept the stock in the limelight throughout the week as it outperformed the market by 4%. On the other hand, POL underperformed the market by 1.6% on the recent slide in oil prices.
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