Striving bulls Losing hope in Karachi Stock Exchange

Weekly Report for 4th Week of Dec. 2009
“Striving bulls Losing hope”


By Khalid Saifuddin
Saturday, December 19, 2009
10:15pm

KSE-100: Trend Bearish – Pressures hitting from all directions
The utmost daring activities of bulls resisted strongly by bears. My given feared zone resulted with strong selling pressure and pushes the bulls back onto lower limits. Though bulls recorded their highest level of skill by testing our level twice in past week.
Market currently in bearish trend with the aggravating bear’s pressure, as per current scenario I don’t see market going above 9293 but have more room in downward direction, tell you breaking the 8,815 will bring real disaster to the market.
9,165 have bouncing capacity and we may see some support between 9,165 and 9,114. Breaking this zone will take market to 8,992. Bulls will get back in the market with power around 8,950.

Recommendation:
It is required for investors to be very specific on scrip selection, target buy will benefit more then the market buys. Banking, Insurance and Cement sector can give some gain in this week. Focusing on given level will give you the chance of capital gain in a bearish market.

Recap:
That’s true the utmost daring activities of bulls recorded this week against the immense selling pressure, and as I warned about the feared resistance zone, that act strongly and make bulls getting on back foot. Thanks to almighty we did not see much of terror events in the past week, but as I mentioned in one of my morning call that, I am not convinced with the 250 positive points on Monday.
And if you noticed that proved in following days, and I also like to remind my friends about my level of 9,248, continuously three days I was warning all of my readers to please consider this level for your offloading decisions.
I think now it is easy to realize, but remember time never returns, so it is good to analyze your decision before execution.

Market Fundamentals
By
Farkhunda Jabeen

KSE: Liquidity-driven market fundamentals are waiting for recouped investors’ buoyancy
Versatile ragbags of foreign investment initiatives ahead are making their way effectively to infuse liquidity in different untapped sectors. China, U.S., Korea, and France have profound interest in capitalizing our banking and power sector. Although political uncertainty and worst law and order situation has rigorously added ‘red’ in investors’ portfolio, some attractive fundamentals have potent enough to restore bull-power of our ‘diffident’ investors. The liquidity-bound initiatives also include monetary ease off at the top of the list, which would not only relax the credit cost of banks but also of the scrips to which banks are exposed. Relaxation in FSV benefit and higher banking spread would be a strong catalyst for banks. These initiatives would lead to bottoming out the earning duck in the financial results of CY09. To boost investors’ sentiment, meliorated credit ratings from key ratings agencies and ADB’s forecast of economic growth to 3 percent in FY10, on the back of upcoming public expenditure program, are flattering go-aheads. This would facilitate in reaching GDP growth to 3 percent this fiscal year. Although power crisis is persistent, forthcoming power projects would well overcome its burden.

Sector Highlights: Welcoming the fresh rally of result announcements
Past quarter corporate earnings across all sectors were not uniform and the trend represented significant divergence, though overall July-Sept financial reporting season rounded off with 7 per cent growth in earnings, likened with the last year matching period. For this quarter, same pattern of sector-specific performance may remain, though some sectors are well expected to be added among the high-earning ones. Banks and few insurance and fertilizer scrip are among them. On monthly basis, OMCs achieved remarkable offtake numerals in October. However, auto sector depicted seasonal decline. Textile, refineries, and cement can also linger in depression.

External front: Rupee can grind to a halt in the wrestle of inflows and outflows
Political uncertainty has also influenced foreign investments recently, apart of local one. FDI has been dropped to 52 percent during first five months of FY10. Rupee has also gone under pressure as dollar demand has rushed. Next, SBP’s move to transfer oil import payment to private sector has brought about only one-time southward trend in rupee, though it would get stable anon, at least in inter-bank market. Besides, although narrowing of CAD to $1.35bn in July-Nov is a good feat, it is backed by lower exports and imports, which reveals hampering of employment. Rupee has thus got stuck in the fight of inflows and outflows initiatives. We may enjoy liquidity through the next IMF tranche of $1.2 billion but it would later on put bonus pressure on rupee at repayment time. On the other side, Upcoming FDI in our unexploited sectors would be a ‘positive’ inflow for our external balance.



Technical Highlights:
EUR/USD
The pair still under immense selling pressure with the continuous bearish trend, but here I suggest my readers to start doing the profit taking of their shorts. Currently it is not advisable to long positions for holding, the pair is going to set new structure, it may give chance to short more in pair, short term possibilities exist for both long and short by honoring the given key levels.
For now I recommend long for short term profitability, trading below 1.4333 will bring more bears into the ring, possible profit taking around 1.4480. Once trading started over 1.4480, it will stabilize the pair for upside move. 1.4437 can also play as weaker resistance, before testing the 1.4480.
Fundamental Highlights:
U.S. economy recommenced growth in the third quarter, ending four straight quarters of decline. The euro zone recorded its first quarter of economic growth in more than a year in the July-September period. Given that the recovery in both regions has been largely driven by government stimulus, there have been fears of a double-dip recession – a scenario where the economy perks up temporarily only to contract again. Thus, IMF seems this recovery as fragile. However, labor markets have generally lagged the recovery. On weekly basis, CPI & PPI rates turned back in positive territory, industrial production increased and housing rebounds after a huge fall, in U.S. In Europe, German IFO Business Sentiment reached at 17 month highs. Euro zone’s October trade balance rose by 57 percent, however CA surplus dropped by 8 percent. Looking ahead Russian Nov Unemployment Rate may have reached to 7.8% and Russian Nov Retail Sales growth may have been dropped to 0.7%.
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