LAHORE - The equity market witnessed relatively subdued trading during the week with the benchmark index hovering near all time highs. Investors booked profits in major blue chip stocks while interest heightened in mid tier and third tier stocks. As a result, the KSE 100 Index remained largely flat (marginally up 0.02 per cent WoW) to close at 15,452 level. Average volumes also declined by 21 per cent WoW to 129 million shares. Despite limited triggers in the market foreigners remained net buyers of shares worth $3.9 million. With Jun 2012 result season drawing to a close, following were the key result announcements during the week.

The current account posted a surplus of $1.2 billion in August 2012 compared a deficit of $321 million in July 2012. In 2MFY13 the current account registered a surplus of $919 million vis-à-vis a deficit of $261 million in the same period last year. The improvement in the external account is largely due to the receipt of $1.18 billion from the US on account of coalition support fund (CSF).

LUCK and DGKC both underperformed the market by 2.1 per cent and 3.1 per cent respectively as cement prices were slashed by Rs10-15 per bag due to weak seasonal demand. On the other hand POL outperformed the market by 2.5 per cent on the back of higher than expected dividend announcement this week. DAWH also outperformed the market by 14.7 per cent on Pak Arab’s intention to buy the entire shareholding of DH Fertilizer Limited from DAWH.

An eventful week of Attock group results and NRO case hearing ended on meager gains of 3 points on week on week basis with volumes dropped by 21 per cent to an average of 130 million shares. Although handsome full year payout announcement from Attock group and signs of reconciliation between judiciary and government on NRO case reflected positively on the market which touched 15,600 points mark during the week. However, fall in global equity markets and decline in international oil prices brought across the board selling on the last trading session. While risk of deteriorating law and order situation during long weekend also pushed investors to trim their positions. Increasing leverage positions also remained a reason of concern as futures roll over will start from Monday.

Experts said that with earnings season for June 2012 (4QFY12 / 2Q2012) drawing to a close, experts flag corporate profitability growth for the quarter at an impressive 29 per cent YoY.  While experts caution that the overall number is boosted by a couple of one-offs, key to note here is that the only major sector with negative earnings growth in the June 2012 quarter has been OMCs (inventory & exchange losses). On the flipside strong growth vis-à-vis June 2011, has been led by robust earnings performance in the cement, power generation (IPP) and Oil & Gas (E&P) sectors.

While it is expected annualised universe earnings growth to moderate in 2013E (to 7 per cent from 12 per cent eyed in 2012E), they flag (1) potential commodity price uptick as QE-3 unfolds; and (2) the possibility of 50-100bp further monetary easing within 1HFY13 (July-December 2012) as key triggers that could provide the next leg up for KSE earnings growth.

Experts highlighted that the overall number has been boosted by a couple of one-off gains, i.e. (1) inclusion of Fatima Fertilizer profits in June 2012 which contributed Rs2,156 million to universe profits where the plant was not in commercial operation in the same period last year; (2) low base for index-heavyweight OGDC’s June 2011 earnings which included Rs15,239 million one-off retrospective downward revision of Kunnar revenues.

Pricing power was once again the key theme delivering earnings growth in June 2012 where experts flag 206bp YoY growth.

While volumes across sectors remained relatively muted, barring a June 2012 pick-up in urea sales, topline growth for our universe at 20 per cent YoY was largely a function of strong pricing exercised by cement, fertilizer and energy sectors.