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| Karachi Bourse |
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This time it was not just foreign investors but the local ones too who pulled the strings of the market during October and helped market regain its lost volumes, which once marked KSE among the most outperforming market in the region. Though still not matching the historical level, the average daily volume jumped substantially 76 percent during the month, which added a refreshing facet to the market, which otherwise saw the local investors sitting on the waiting fence.
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The foreign investors, this month also made the market feel their presence with the net buying of $32 million. The foreign investment could be attributed to regional phenomenon that is prevailing in all regional markets and Pakistan is no exception in attracting the flow of funds to the region. However, the new love of local investors for the market mainly stemmed from the healthy corporate earnings during the month. “Local activity was largely driven by the corporate result announcements, which based on our sample of 40 companies was up 13% YoY in 1QFY11”, Atif Zafar, an analyst at JS Global Research noted in his research report.
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| Locals Lift Karachi |
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While the corporate profits increased by 13% YoY to Rs 62 billion ($722 million) in Q1FY11 from Rs 55 billion ($663 million) in Q1FY10, the growth was largely skewed towards the energy companies (up 41% YoY).
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Hampered by the floods, the manufacturing sector failed to impress as its profits fell by 33% YoY. Despite the banking sector’s profitability improving by 6% YoY, the services sector recorded a negative growth of 6% YoY.
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| Oct Local Bourse Lift |
The energy companies recorded an impressive earnings growth of 41% YoY, largely driven by a 45% YoY growth in the E&Ps (increased production flows & higher wellhead gas prices) and a 35% YoY rise in the profits of the power utilities. Moreover, higher GRMs caused marked improvement in the bottomline of the refiners. However, OMC profits remained subdued due to higher tax incidence arising from the increase in the turnover tax rate to 1%. With domestic demand taking a major hit (cement dispatches and fertiliser offtake declining by 18% YoY and 30% YoY respectively) because of the recent floods, earnings of the manufacturing sector fell by 33% YoY in Q1FY11. However, textile companies made hay and saw profits surge by 203% YoY due to improved margins on the back of low priced cotton stock available from last year.
