Horror story: A bloody Monday

KARACHI:

Pakistan equities took a major beating on Monday, feeling the heat of several triggers to end negative for a ninth successive time.

The benchmark-100 index last ended positive on November 17, gaining 119 points to close at 34,065. However, that was the last bit of positive news as the index has since endured a tumultuous southward journey.

Analysts termed the government’s decision to impose additional taxes worth Rs40 billion as a negative trigger, worsened with developments on the political front which saw charges against former petroleum minister Dr Asim Hussain deepen further.



At close on Monday, the Karachi Stock Exchange’s (KSE) benchmark 100-share index fell 2.12% or 699.02 points to end at 32,261.25, nearly wiping off all gains made in 2015.

The pressure on oil prices and reports of rebalancing by local capital protected funds induced further selling as investors continued to tread with caution in the absence of meaningful positive news.

Shares of 345 companies were traded on the opening day of the week with only 46 ending positive. Shares of 289 companies declined while 10 remained unchanged.



Elixir Securities in its report said equities dropped the most in three months as rising political noise sent stocks tumbling.

“Stocks had a weaker start as reports of rebalancing by local capital protected funds and foreign selling in select names resulted in benchmark index shedding nearly 1% by noon on thin volumes.

“Then news of a former petroleum minister confessing corruption and terror charges triggered selling in the wider market and index took a nosedive to test 32,200 levels. Market closed near its intra-day low as value buyers at lows were not so aggressive in the wake of rising political noise.”

Speaking to The Express Tribune, Standard Capital Securities Head of Research Faisal Shaji said the reason for the continuous decline in the benchmark index is the lack of “absorption capability” among local investors. “Local investors aren’t buying as enthusiastically as foreign investors are selling. This is causing a drop in share prices,” he said.

Foreign investors have sold shares worth more than $273.2 million since the start of 2015. The KSE-100 Index has risen just about 0.4% over the same period.



Shaji said the meeting of brokers with the Securities and Exchange Commission of Pakistan (SECP) chairman scheduled for December 1 can possibly be a trigger for the broad market sentiments. The SECP has called the meeting to address the concerns of stock brokers, especially small ones, over the newly introduced capital market regulations.

Zeeshan Afzal, head of research at Taurus Securities, says the outlook of foreign mutual funds is changing, as they shift their investments away from emerging and frontier markets in the wake of an impending interest rate hike by the US Federal Reserve.

In addition to foreign selling, Afzal believes ongoing inquiries against some brokers have also created instability in the stock market. “Some of the small brokers expect their compliance costs to go up significantly as a result of the new regulations,” he said.

Trade volumes rose to 143 million shares on Monday compared with Friday’s tally of 122 million shares.

The value of shares traded during the day was Rs6.9 billion.

K-Electric was the volume leader with 13.3 million shares, losing Rs0.08 to finish at Rs7.20. It was followed by TRG Pakistan with 9.3 million shares, losing Rs1.65 to close at Rs36.88 and Silk Bank Limited with 7.4 million shares remaining unchanged at Rs1.88.

Foreign institutional investors were net sellers of Rs850 million during the trade session, according to data maintained by the National Clearing Company of Pakistan Limited.

Published in The Express Tribune, December 1^st,  2015.

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