LAHORE - Amid domestic political turbulence and global economic crisis, investors adopted a cautious approach during the week. The bullish momentum linked with the changes in capital gains tax regime started to fizzle out as the KSE 100-index gained only 0.2 percent WoW and closed at 11,983 points. This can also be vindicated by 36.8 percent WoW decrease in average volumes to 91.8 million shares. Moreover, foreigners remained net buyers obtaining shares worth $2.2 million during the week. On the macro front, CPI for January clocked in at 10.1 percent YoY.

The World Trade Organization (WTO) approved the European Union (EU) waiver on duties for 75 products from Pakistan. It is intended to help the country recover from devastating floods in 2010. These products include certain textile products, leather goods and ethanol. The textile sector is the major beneficiary of this move, which can also be gauged from the price movement of top textile sector stocks on board, namely NML and NCL, both outperforming the market by 3.1 percent and 2.6 percent during the week.

The financial results released during the week were FFC, POL, APL and LUCK. FFC reported an EPS of Rs26.52 in 2011 (up 104 percent YoY) together with the final cash dividend of Rs5.25 and a bonus issue of 50 percent. POL posted an EPS of Rs26.08 in 1HFY12 (up 19 percent YoY) and announced a cash dividend of Rs17.5/share. APL registered an EPS of Rs32.08 in 1HFY12 (up 27 percent YoY) and announced a cash dividend of Rs17.5/share. Lastly, LUCK posted an EPS of Rs9.33 in 1HFY12 up 106 percent YoY.

Experts consider KSE-30 Index a better gauge to understand upcoming market moves after considering that bulk of the trades in KSE100 (approximately 45 percent market participation) is confined to second and third tier scrips like JSCL, BAFL, LOTPTA, DGKC and FATIMA for the last two sessions. KSE30 has failed to move past the trend line resistance in play since late July 2011. A retreat now seems more possible. KSE30 closed down approximately 40 points at 11,181.40 with an 18.5 percent decline in market participation.

OGDC witnessed profit-taking amidst thin market participation to close at 151.87, bouncing off its 50 SMA at 150 and trend line support at the same. They have a buy on weakness stance. POL (Mkt. Avg. 368.37) - POL came under selling pressure amidst relatively thin market participation of 1.8 million shares - down 56 percent compared to the previous session. Expect further decline till 355 (50 SMA). NBP rallied further on move past 45 amidst relatively flat market participation of 8.5 million shares with regards to the previous session. Further upside is likely to come under selling pressure at 47.50 (200 SMA).

PSO came under further selling pressure and failed to close above its 61.8 percent retracement at 256.43. We believe a further downside till 246 (50 percent retracement) cannot be ruled out. Set your stoploss at 256.50 and Sell on move below 251.75. FFC is now retreating and the possibility of a handle in the making cannot be ruled out. Wait for the formation to evolve before increasing exposure. As anticipated ATRL came off its intra day high amidst high market participation of 4.53 million shares to close down at 121.81. Sell on move below 120.75. ENGRO successfully rallied further to close at 116.09. Expect some volatility as it heads for 127.

Pakistan Oilfields Limited (POL) announced its 1HFY12 result. The company posted earnings of Rs6.2 billion (EPS Rs26.08), up 19 percent YoY. In 2Q alone, earnings clocked in at Rs11.47/share, a decline of 21 percent QoQ. The 2Q result came in much below market consensus. The primarily reason for this was higher than expected amortization of development and decommissioning costs (Rs732 million vs estimate of Rs355 million), which has also likely raised the effective tax rate for the quarter to 41 percent. Along with the result, the company announced higher than expected first interim cash dividend of Rs17.5/share.

The growth in earnings during 1HFY12 is mainly attributed to higher 1) oil and gas production and 2) Arab Light crude oil price. The company’s top-line increased by 25 percent YoY to Rs14.5 billion in the period under review. A strong growth of 51 percent YoY in other operating income further boosted the bottomline.