Pakistan Stock Market July Review and Outlook

KSE logoCarrying forward the momentum evident in the previous month, the KSE-100 Index yielded positive 3.90% return in July’15 and took the CY15TD return to 11.24%. During Ramadan covering two thirds of July Karachi Stock Exchange (KSE) recorded daily turnover of about 447 million shares as against 358 million shares traded in the previous month, up 25%MoM.

During the period under review the value traded grew by 61%MoM to US$196.5 million as compared to US$121.9 million in June’15. Going forward, with commencement of the result season for the period ended June, benchmark KSE-100 Index is likely to remain positive at the back of expectations of impressive result coming from index heavy weights (Banks and Oil & Gas). Cement sector is expected to register its best quarterly performance.

The market had been on a continuous upward trajectory since a week prior to the FY16 budget where it yielded 9.0% return and remained amongst the key performing markets in the region. Ramadan FY16 can be classified as a repeat of Ramadan FY15 as the market performed more or less in the same manner as it did during the previous year.

Similar to last year, the KSE-100 Index’s best performance came in the 2nd ten days of the holy month where it punched in a return of 3.6% in FY16 as compared to previous year’s performance of 2.5% during the same period. In addition to this, similarities were also there as far as the volume trend is concerned between FY16 and FY15 where during the final ten days average daily turnover touched almost 339 million share as compared to 333 million shares in the first ten days and 385 million shares during the second ten days.

The main driving force behind abovementioned volume increase remained heightened interest coming from Companies (net buy US$39.4 million) and Individuals (Net buy US$31 million). In addition to this, US$24.6 million and US$13.4 million coming from Mutual funds and NBFCs also added the positivity. Conversely, Banks and foreigners remained prime suppliers as they sold net equities worth US$36.2 million and US$21.3 million respectively.

Keeping such sharp upward movement in mind a correction in the short term cannot be ruled out. However, with result season being right around the corner and sequential improvements in earnings of Cements and allied industries (on the back of seasonality factor) along with OMCs & E&Ps (due to low oil price volatility) expected, analysts attach low probability to immediate market correction.

 

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