Impasse mutes performance
 By   RECORDER REVIEW

Following the prevailing political uncertainty in the country, the Karachi Share market remained volatile during the last week end on August 29, 2014.

Overall the benchmark KSE-100 index posted a decline of 304 points (weak on weak) to close at 28,568 points end of the last week compared to 28,872 points a week earlier.

Among five trading days of the week, initial four days market remained negative.

While on last trading day the share market closed higher after the PAT and PTI accepted Army as mediators and announced to resume dialogues with the government to end the protest.

After declining 3.8 per cent during the first four trading days (Monday to Thursday) of the week due to continuing political deadlock, the benchmark index staged a strong recovery on Friday, gaining 793 points or 2.9 per cent as the midnight meeting between protest leaders and the Army chief fuelled the expectations of the conflict resolution.

At the end of the week, the index closed at 28,568 points, down 1.1 per cent WoW.

The political noise kept the majority of investors on the sidelines, as average daily trading volumes declined by 4.4 per cent (WoW) to 119 million shares compared to 124.3 million in the pervious week.

 In addition, with average daily value traded down 3.7 per cent (WoW) to $61.84 million per day from $65.18 million. The market capitalisation also posted a 0.5 per cent decline to Rs 6.727 trillion at the end of the week.

"Investors'' concern on the current political crisis in the country muted the performance of the stock market as the benchmark KSE-100 index lost 1,100 points during the first four sessions of the week.

However, the market recovered on the week''s last trading day by 793 points on probable resolution of the deadlock given talks between the Army Chief and the protesting parties," said Rahel Ashraf of the JS Global.

Resultantly, the KSE-100 index closed the week at 28,568, down 1.1 per cent WoW, while low investor confidence reflected in the average trading volumes as well which declined by 4.4 per cent 19 million shares, he added.

Construction and Materials sector plunged by 4 per cent WoW on the risk of the imposition of anti-dumping duty on Pakistan Cement exports to South Africa.

Meanwhile, better-than-expected earnings and dividend announcements led to KEL outperforming the market by 11 per cent WoW, Ashraf mentioned.

Other highlights of the week included Current Account deficit clocking in at $454 million in July 2014 vs.

$125 million in July 2013, the LSM growth of 3.9 per cent YoY for the FY14, the Prime Minister signing $664.8 million project financing for Dasu Hydropower Project and Sindh Agriculture Growth Project with World Bank, Pakistan receiving $371.4 million from the US under the CSF and forex reserves dipping by $344 million to $13.6 billion.

Commenting on the outlook of the market, an analyst at the KASB Securities said the next week''s market performance depended completely on the resolution of the current political stalemate between the ruling party, Pakistan Tehreek-e-Insaaf and Pakistan Awami Tehreek.

"We believe that the involvement of the army as a facilitator in the political crisis is a positive development and has raised the possibility of an early resolution - a scenario, which can sustain the rally," he added.

"However, with the current situation emerged on Saturday night, when the government started an action against the PAT and PTI protestors, marching toward the Prime Minister House, has created another uncertainty regarding law and order situation," analysts said.

They said that clashes between police and protestors may hit the sentiments of the market players and investors.

The market participants shall continue to actively track political news flow with any possible resolution to be hailed at the bourse, they added.

September, 2014

Source:  Business Recorder