KARACHI: The stock market gained 233 points, or 0.5 per cent, during the outgoing week, which had just two sessions due to Eidul Fitr holidays.

The index rose by 379.54 points on Thursday, but lost 146.56 points the following day to close at 46,565.29.

The trading pattern scarcely interested investors. Stocks that managed to rise were Habib Bank which increased 1.2pc, Hascol 5pc, Pakistan Tobacco 4.9pc, Pakistan International Bulk Terminal Ltd 5pc and Honda Atlas Cars 3.5pc; these shares added 116 points to the benchmark index.

On the flip side, shares that lost value included Hub Power which dropped 3.5pc, Oil and Gas Development Company 3.1pc, Engro Corporation 2.3pc, Fauji Fertiliser 2.3pc and Dawood Hercules 2.8pc, collective taking away 221 points off the index.

June saw bad performance

The market fell 7.96pc during June, 3.3pc in the April-June quarter and 2.6pc in January-June. However, it managed to yield a positive return of 23.24pc in the outgoing financial year compared to 10pc in the previous year.

According to a report prepared by analyst Adnan Sami Sheikh of Topline Securities, trading volumes in June contracted by 24pc month-on-month to 257 million shares, whereas the traded value was down 34pc to Rs12.8 trillion due to fewer working days and the absence of triggers.

The market performance in June, which saw the bulk of this year’s sell-off, was the worst since March 2015, as the index crashed due to a plethora of negative news, and targets and expectations that failed to materialise.

Whatever goes up must come down

Until the end of May, the benchmark KSE-100 index continued to rally, hitting all-time highs almost on a daily basis. On May 25, the index had gained 11pc this year to reach its highest-ever level of 52,876 points.

Much of it had to do with investors’ ceaseless buying of six heavyweight stocks declared to be the part of MSCI emerging-market index when the Pakistan Stock Market (PSX) was upgraded on June 1.

Although everyone who had anything to do with stocks was predicting an inflow of between $300 million and $450m on May 31, a day before the index upgrade, the hopes were dashed when the final figures declared net outflows of $82m on June 1.

It added fuel to the fire that had set off on a disappointing federal budget that set aside key proposals of the PSX and instead saddled it with higher taxation.

All in all, the stock market, which had boasted a return of 46pc in 2016 — the highest in Asia and fifth best in the world — was humbled in the first half of 2017 with a negative return of 2.6pc. Barring the United Arab Emirates, China, Qatar and Russia, the PSX index has underperformed most of the regional markets.

Foreign and local participants

Foreign investors remained net sellers during the first half, with the quantum growing over sevenfold as they offloaded positions worth $333m compared to $41m sell-off during the same period last year.

Major foreign selling was concentrated in cement companies ($136m), followed by power ($43m) and banks ($39m). Among local participants, mutual funds were ahead in buying equities worth $268m, while insurance companies also were net buyers of $128m. Individuals and banks remained sellers, offloading shares worth $77m and $73m, respectively.

Outlook

Besides the political uncertainty, Pakistan’s external account situation is also not too rosy. However, Topline Securities expects the KSE-100 index to hit 54,000 points by the end of December.

Published in Dawn, July 2nd, 2017