KARACHI: Pakistan stock market took investors on a roller coaster ride in the outgoing week and after dramatic twists and turns, the KSE-100 index finally closed the week almost flat with a slight drop of 41 points but above the 41,000 levels at 41,064 points.

Political upheavals, foreign investors’ outlook to equities, and oil prices were major factors that determined the market direction. Trading week started on a negative note, exhibiting an extension of the previous week’s equity meltdown. In the first two days of the week, the benchmark KSE-100 index lost a cumulative 1,488 points and touched 14-months low at 39,617 points, as foreigners went on a selling spree recording outflow of $25.32 million and on the political front bailable warrants were issued against former prime minister Nawaz Sharif and the Finance Minister Ishaq Dar.

However, the market witnessed a relief rally from Wednesday regardless of the prevailing external account weakness and relatively poor corporate results. The benchmark index recovered 1,447 points, on slight cooling on the political front as the former PM presented himself before the accountability court, dispelling fears of agitation; upsurge in prices of crude and slowdown in foreign portfolio outflows to just $5.41m in the last three days of the week.

Foreign selling during the week was concentrated in commercial banks, $6.0m; exploration and production, $4.7m; fertilisers, $4.4m; power, $2.1m; and cement, $2m. Rebalancing-led foreign selling was matched by mutual funds that absorbed $9.99m, insurance companies adding $10.6m worth shares to their portfolio and companies which bought equities valued at $6.1m.

Average daily traded volumes for the outgoing week receded by 12.8pc per cent to 117m shares with mainly side-board items as volume leaders. Turnover in PAEL was recorded at 49.81m shares, followed by TRG at 41.76m, ANL at 27.04m, SNGP at 26.76m and WTL at 25.1m. Traded value was up by 3pc to $68m.

Stocks including PPL which was up 8.47pc, OGDC 7.45pc, POL 5.60pc and Mari 8.63pc, added 411 points. Major drag came from UBL which was down 3.89pc, Lucky 4.30pc, SNGP 4.25pc, DAWH 3.64pc and BAHL 3.45pc shedding 225 points.

Sector-wise, oil and gas exploration was the biggest gainer of the week contributing 418 points to the index led by OGDC and PPL which contributed 145 points and 141 points to the index respectively. Sectors under pressure during the week were cements, down 133 points, followed by commercial banks 128 points, power generation and distribution 50 points, technology and communication 30 points, and cable and electrical goods 27 points.

Key news flows during the week included: China vowed to continue its support for the CPEC projects irrespective of the change in federal government, ADB approved $800m Multi-Tranche Finance Facility for CAREC road corridor development in Pakistan, government increased the petroleum prices for the month of Nov’17; the country’s total reserves decreased by $59.3m to$19.84 billion, Circular debts soared to Rs450bn and CPI for Oct’17 clocked in at +3.8pc year-on-year.

Outlook: The KSE-100 index is currently trading at a price-to-earnings multiple of 9 times (2017) while offering dividend yield of 6.2pc. Market pundits said that they visualised stocks to remain range bound in the upcoming week, attributable to conclusion of result season and limited triggers. However, the much-awaited semi-annual review of MSCI-EM index (scheduled to be announced on Nov 13) could drive market sentiments. Cooling on the political front may also turn out to be positive for the market. Yet the concerns over external sector could again cloud the market sentiment.

Published in Dawn, November 5th, 2017