KARACHI: Bears were in complete command at the Pakistan stock market in the outgoing week where the KSE-100 index sank 1,466 points (3.5 per cent) to close below the 40,000 points level after almost a year and settled at 39,847 points. Including the losses during the week, the aggregate loss to investors since Jan 1 has surged to 17pc.

The majority of the investors kept away from the market – their battered confidence failed to find any support as domestic politics and economy continued to attract headlines for all the wrong reasons. The Army chief voiced his concerns over the deteriorating macro-economic indicators, while the State Bank of Pakistan (SBP) in its annual report also admitted to external and fiscal accounts pressures, stated JS Global Research.

“Political headwinds, concerns regarding the macroeconomic situation and seemingly tensed relations between the civil and military factions of the country kept the market under pressure,” noted AKD Securities.

The only saving grace during the outgoing week was that the Pakistan stock market attracted net inflow of $38.88 million, which turned out to be the biggest single week foreign buying since May’13. The previous highest weekly net accumulation in FY18 was $27.7m in the beginning of the year. The net inflows were quite in contrast to the net foreign selling worth $9.7m in the previous week.

Analysts believed that the overseas investors were emboldened by the official government statements denying need for rupee devaluation.

On the domestic front, selling was concentrated in cements ($5.65m) and commercial banks ($5.40m) with mutual funds being the main culprits behind offloading ($30.17m) followed by individuals ($7.79m).

Average volumes during the week were set at 146m shares, up by 4.1pc over the previous week, while value-traded pulled back by 16.5pc to $59.25m, indicating that major activity was generated by sideboard items. Volume leaders included KEL with 120.63m shares, followed by TRG with 39.96m shares, ANL with 33.20m shares, Chakwal Spinning Mills with 24.33m shares and BoP with 21.29m shares.

According to AHL Research, top 5 laggards that erased 390 points from the KSE-100 index included Lucky which was down 113points, HBL with a loss of 82points, followed by Engro with 68 points, Dawood Hercules down 64 points and SNGP with 61points.

Sectors that performed poorly during the week included cement, down 312 points amid continuous pricing pressure in the North zone, fertilisers 208 points, oil and gas marketing companies 164 points, commercial banks 154 points, and power generation and distribution 121points.

At the other end of the spectrum, oil and gas exploration companies provided support, gaining 71 points given international oil prices (Arab Light) were up by 2pc on average since last week’s closing.

Key news flows impacting the market included Nepra announcing its decision on KEL’s MYT review petition where the regulator approved a minor 5pc increase in previously announced tariff to Rs12.77/KwH against the company’s demand of Rs16.1/KwH; ECC approving the rise in margins of petroleum products, deregulation of HSD and renewal of textile package with 50pc of rebates to be offered without any condition; fiscal deficit narrowing to 0.9pc of GDP in 1QFY18 vs. 1.35pc of GDP in 1QFY17 and World Bank reiterating its concerns over the external sector of Pakistan.

Outlook

The KSE-100 index is currently trading at PER of 8.0x (2018) compared to Asia Pacific regional average of 14.1x and while offering dividend yield of 6.2pc versus 2.5pc offered by the region.

AHL Research said that with the market becoming increasing aware of political conundrums amid lack of other triggers, investors were expected to find new support from foreign inflows.

AKD Securities believed that despite more political developments next week, investors were expected to watch out for the result season where ISL, DGKC, Shell, Kapco, UBL and Attock group companies are set to announce their quarterly results.

Published in Dawn, October 15th, 2017