Weekly Forecast for the
1st Week of Feb 2010
Exhausted Bears and Striving Bulls noticed in Karachi Stock Exchange
By
Khalid Saifuddin
Farkhunda Jabeen
Saturday, 30th January, 2010Market Expectation:
From the beginning of the Past week market was under total control of Bears, continuous selling pressure blasted on Thursday by making the low of 9,415 and this was already mentioned in last week report. The market was volatile with the low interest of local and daily traders; market lost 163 points which is 1.67% of the total index, target buying witness on Thursday low overall 46% increase in volume recorded. Corporate result wasn’t able to make difference because of major concerns like monetary policy and uncertainty of political and economic conditions of the country.
Foreign reserves declined, FIPI and local institutions decided to be sideliner.
Last two days of the weeks bulls manage to push Bears back, though the trend is still not establish the chart is waiting for one more candle to be decisive on trend.
For daily traders it is recommended to follow the index, breaking 9,568 will be more selling pressure, on the other hand breaking 9,641 will bring bulls into the market, 9,812 is the major resistance, in present scenario market doesn’t look able for crossing this resistance.
It is suggested to buy specific banks, Insurance and few from oil sector. It is also required to make room to add more on given supports.
As we are experiencing trading on levels benefit in all type of market behavior so I still see great potential for local traders by honoring the precise levels of the market. I still prefer some profit taking followed by the target buying of selective scrips.
Key Levels
9,812
9,736
9,641
9,568
9,411
9,250
Market still looks fabulous and energetic for the near future. Key advice is to reschedule your portfolios and gear up for March, 2010. Buy recommended on given support levels for high returns.
Monetary Update: Status quo maintained but credit pump is still open for private sector.
Despite 10.51% YoY CPI for Dec-09 compared to 23.3% observed in last year and to market consensus forecast of 11.8%, there has been no further reduction in policy rate due to following judgments:
• Reliance of interest rates more on liquidity rather than policy rate.
• Effectiveness of cautious monetary strategy, in the last 12 months, in controlling money supply and inflation, which can be offset, if there was executed again rate cut theme.
• Reduction of T-bills yields not to ease overall money supply but to restrain credit to pass it to government, which has always burdened inflationary pressures and caused crowding out effect – again a cautious monetary approach to discourage inflation sources and encourage private investment.
Besides, the main driver of banks’ credit off take is economy’s demand for credit which is signaling revival on back of favorable numerals of manufacturing sector. That’s why amid this demand, if SBP facilitates liquidity accessibility to private sector through its 'side approaches', it may save the banking sector and also private investors to hurt from the cautious policy rate approach. To sum up, SBP's combined approaches to facilitate investment avenues for banks should be under consideration rather than just the policy rate.
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Disclaimer: This commentary, news or key levels are not a recommendation to buy or sell, but rather a guideline to interpret the specified indicators. This information should only be used by investors who are aware of the risk inherent in securities trading. We accept no liability whatsoever for any loss arising from any use of these levels. However the author DOES NOT GUARANTEES the accuracy of information provided on this report and is NOT RESPONSIBLE FOR ANY ERRORS AND/OR OMISSIONS.