KARACHI: Bears continued to prowl the stock market, knocking down the KSE-100 index by 1,233 points (3.5 per cent) which closed at 33,902, marking one of the biggest single weekly loss. Although the index was pummelled for the first four consecutive sessions during the week, it managed to rebound a little on the last trading day as the rupee managed to recover some of the lost grand against the dollar.

In the outgoing week, poor economic conditions continued to take its toll on the market to which were added other major negative factors in the lead of exchange rate volatility with the local currency touching a high of Rs164 in the interbank market before closing at 159.50. With the International Monetary Fund (IMF) board meeting due on July 3, investors decided to play safe and shift from equities to the safe heavens where gold prices recorded strong gains.

Investors were also unnerved by the Financial Action Task Force’s evaluation of Pakistan’s performance in dealing with terror-financing and money laundering. Gas tariff hike of up to 191pc was approved by the Economic Coordination Committee which was feared to aggravate inflationary pressure in the economy, lending credence to concerns of further monetary tightening by the State Bank of Pakistan.

Moreover, Fitch solutions in its latest report revised its stance downwards on Pakistan’s GDP forecast for FY20 to 2.7%. All of those concerns were exacerbated by the mounting pressure from opposition parties as the heated debates continued in the National Assembly on Budget for FY20. The only positive during the week was the visit of Emir of Qatar who made commitments to inject $3 billion into the country’s economy in the form of investments and deposits.

Foreign investors bought stocks worth $7.7 million taking advantage of an oversold market as against net selling $5.7m last week. Foreign buying was witnessed in cement at $4.5m and commercial banks $3.6m. On the domestic front, major selling was reported by mutual funds of shares worth $14.7m, followed by individuals who reduced their positions by $4.7m.

The average traded volume improved during the week to settle at 147m shares, up by 17.4pc, while value traded clocked in at $29m (higher by 5.7pc). The increase in volume and value was mainly driven by year-end repositioning by banks and mutual funds.

Sector-wise, the resurgence of international oil prices due to tensions in the Middle East and currency devaluation failed to invigorate interest in exploration and production sector which made negative contribution of 279 points. Cement and oil marketing companies together ate up 207 points, which was despite recovery in cement prices by Rs15-20 per bag over the week. Commercial banks lost 306 points and fertilisers were down by 197 points on gas price hike.

In terms of individual stocks, Pak Suzuki fell 18pc, Honda Atlas Cars 12pc and International Industries 11pc were among the major laggards. Other decliners in terms of points included: Habib Bank, decreasing 142 points, Pakistan Petroleum 132 points, Fauji Fertiliser 80 points, Oil and Gas Development Company 75 points and Lucky Cement 70 points. On the flip side, positive contributions came from National Foods, up 26 points, Fatima Fertiliser 19 points, and HBL Growth Fund 13 points.

Going forward, market gurus said that the formal bailout approval by the IMF board could provide some relief to investors. But the market was expected to remain volatile as participants wait for the expectedly high June 2019 inflation announcement which would indicate future course of interest rates. The Organisation of Petroleum Exporting Countries meeting was also seen to impact global oil price movement with its effect on the index-heavy E&P stocks.

Published in Dawn, June 30th, 2019