Lahore - The Karachi Stock Exchange (KSE) sustained its positive momentum from last week as the visit of the Chinese President led to increasing optimism over Pakistan macros. The Chinese President signed agreements and MoUs worth $46b in energy, infrastructure and other areas during his visit. Also, better-than-expected corporate results for the quarter Jan-Mar 2015, particularly by banks, boosted market sentiments. As a result, the benchmark KSE 100-index closed the week 1.6% WoW up at 33,775 with average trading volumes clocking in 11% WoW higher at 329m shares/day. Foreigners too were net buyers of US$7.6mn during the outgoing week vis-a-vis net buying of US$7.4mn in the preceding week.

Other key highlights of the week were: (1) National Accountability Bureau (NAB) recommending Federal Board of Revenue (FBR) to collect data regarding stock exchange transactions and enquire about sources of investment, (2) Government assuring IMF that circular debt will be capped at Rs250bn next year which is presently Rs230bn, (3) LSM growing by 0.92%YoY in Feb-2015 & (4) SBP expecting banking profitability to stay intact despite successive rate cuts.

Market experts said that bull-run in the market continued for the fourth consecutive week as Index crossed 33,775 points, up by 1.6% WoW.

Amongst key sectors, major buying was seen in banks, food producers and automobile assemblers sector which went up by 3-6% WoW. During the outgoing week, foreigners bought shares valuing $123.8m and sold shares worth $116.1m with net buying of $7.7m. Local mutual funds were net buyers of $26.1m while local banks were net sellers of $19.7m.

During the week, Bank Alfalah (BAFL), NIB Bank (NIB), Bank of Punjab (BOP), United Bank (UBL), and Searle Company (SEARL) were the major gainers, whereas Pakistan Tobacco (PAKT), Murree Brewery (MUREB), Pakistan Cable (PCAL) and Nishat Chunian (NCL) were the major losers.

During the week, Pakistan Petroleum (PPL) announced 9MFY15 consolidated earnings of Rs30.4b (EPS Rs15.5), down by 18% YoY led by lower oil prices. In 3QFY15, earnings declined to Rs7.8bn (EPS Rs4.0), down by 26% YoY and 13% QoQ. Nishat Mills (NML) declared 9MFY15 consolidated EPS of Rs14.9 – down by 12% YoY. Decline in profits is attributed to the 2% appreciation of PKR against US$. In 3QFY15, company posted EPS of Rs5.1, up 16% YoY mainly due lower tax paid arising from BMR. National Foods (NATF) announced 9MFY15 earnings of Rs617m (EPS Rs5.9), growing by 19%. Gross profit of the company improved by 14% to Rs2.7b led by higher sales. In 3QFY15, the company reported earnings growth of 25% YoY and 20% QoQ. Murree Brewery (MUREB) also reported earnings growth of 34% in 9MFY15 led by improvement in gross profit which improved by 28% to Rs1.5bn. Kohinoor Textile Mills (KTML) declared 9MFY15 consolidated earnings of Rs2.5bn (EPS Rs10.2) – up 17%. Revenue grew by 6.4% YoY to Rs26.8bn. On quarterly basis, revenue rose by 10% while profits grew by 21%. Rise in earnings came from 410% YoY growth in other income owing to dividend income from its subsidiary Maple Leaf Cement (MLCF).

Abbott Laboratories (ABOT) declared 1Q2015 earnings of Rs563mn (EPS Rs5.8) – down 11% YoY. Revenue declined by 4% YoY to Rs4.3bn, while gross margin fell by 300bps to 36% mainly to company’s inability to increase drug prices in regulated market.

During the week, Pak Suzuki Motor Company (PSMC) announced 1Q2015 earnings of Rs946mn (EPS Rs11.5) against Rs443mn (EPS Rs5.4) in the same quarter last year. This result was in line with market consensus estimates.

Revenue of the company posted a growth of 43% YoY to Rs19.6bn owing to 55% YoY volumetric growth. Company sold 30,950 units in 1Q2015 compared to 20,022 units in the corresponding period last year. It is important to note that, 30,950 units vehicles sold at a discount to the Govt. of Punjab, under taxi scheme.

Gross margins of the company improved by 401bps to 11.1% in 1Q2015 versus 7.1% in the same quarter last year. We attribute this improvement to favorable exchange rate of Pak Rupee (PKR) against both US dollar (US$) and Japanese Yen (JPY). Just to highlight, PKR appreciated by 16% against JPY and 2% against USD in 1Q2015 versus same quarter last year. Thus, gross profit surged by 125% to Rs2.2bn in 1Q2015 compared to Rs970mn in 1Q2014. United Bank Limited (UBL) also announced 1Q2015 earnings of Rs7.5bn (EPS Rs6.2) during the week, up by 15% QoQ and 37% YoY led by growth in core earnings. The bank also announced cash dividend of Rs3/share. The results were above market consensus estimates. An impressive earnings growth is likely attributed to the higher core income witnessed by the bank during the period under review. Net Interest Income (NII) of UBL improved by 2% QoQ to Rs13.5bn in 1Q2015. Income from high yielding Pakistan Investment Bond (PIBs) and improving deposit mix resulted in higher NII despite falling interest rates. Moreover, normal deposit growth must also have contributed to this. Interest earned on assets rose by 2% QoQ to Rs23.6bn, whereas interest expense increased by 3% QoQ to Rs10.1bn.