KSE-100 Index: Daily Overview – October 20

After dropping 272 points on October 19, the KSE-100 index gained 45 points on Thursday, October 20 amid news of relaxation in banking regulations to close at 11,685 points.

There was a rumour that the government has relaxed the FSV regulation for banks and thus the previously monotonous sector, showed signs of life with investors taking advantage of the news.

Earlier in the month, the State Bank of Pakistan, in its new monetary policy, had slashed the discount rate by 150 basis points to bring it down to 12%. Citing this, investors had expressed their concerns over decreased banking margins and thus there was no significant activity in this sector since October 10.

MCB, Askari Bank and NBP were the top performers in this sector and Mr. Ali Nadeem, Manager of Equity Sales at First National Equities, emphasised that NBP was the main beneficiary of this relaxation and therefore closed at upper-lock.

After experiencing a bullish trend, the Fertilizer sector experienced a slight dip. FFC, Fatima Fertilizer and Engro failed to perform as per market expectations and this situation can be attributed with profit taking. It was earlier announced by authorities that gas supply to Engro will be closed till further announcement, but positive news in this regard instigated larger volumes in the scrip, indicating a new resistance level for the industry giant.

Analysing the market situation, Ali stated that selling in the fertilizer sector by local state owned funds such as EOBI can be a major reason for the dip and that this will not be a long-term phenomenon. He added that an improvement in the banking and cement sectors is largely due to foreign investment.

The government has initiated the Diamer Bhasha Dam and it is largely believed that Pakistan’s cement industry will largely benefit from the project. However, Ali added that no clear indication in this regard can be deduced this early.

With major result announcements expected in the next week, it is highly anticipated that activity can surge in the cement and fertilizer sector. However, law and order conditions in addition to political unrest and energy crisis continue to halt foreign investment in the country.

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Posted by Hammad Malik on Oct 21 2011. Filed under Business. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry