Weekly review: Violence restricts recovery

Continued uncertainty in global markets also contributes to average performance.

KARACHI:

The deteriorating law and order situation in the city took its toll on the Karachi Stock Exchange as investor activity remained subdued during the week.

The benchmark KSE-100 index closed the week flat, rising by 0.2 percent or 22 points to close at 10,902 points, lower than the psychological level of 11,000 points.

The ongoing uncertainty in global markets also continued to hamper the KSE’s performance during the shortened week due to Friday being a holiday on account of Jummatul Wida.

The law and order situation in Karachi hit a new low over the past week as more than a hundred people were killed and bodies were found with torture marks, creating a state of fear within the general populace. As a result of the violence, the Muttahida Qaumi Movement announced a ‘day of mourning’ on Tuesday, which turned into an all-out shutter down strike and crippled business activity in the commercial hub of the country.

All this resulted in very low market participation and volumes dropped even further, even more than the abysmal levels witnessed in the previous week.

Volumes stood at 35.7 million shares, down 1.6 per cent over the previous week due to the lack of market participation.

Uncertainty in global markets also played their part in the poor performance at the KSE as Moody’s reduced Japan’s credit rating from Aa3 to Aa2, citing weak growth prospects and massive government debt. The downgrade of one of the world’s largest economy did little to ease fears of a renewed recessionary period in the global economy.

Yet, despite the global concerns, foreigners returned to the market and were net buyers in local shares and finally broke the trend of continuous outflow of fund from the country since the start of August. Net foreign buying stood at $1 million compared with net outflow of $4.8 million in the previous week.

The corporate earnings season dished out a few surprises as Indus Motors and Lotte Pakistan announced better-than-expected earnings of Rs34.9 and Rs0.8 per share respectively.

The KSE’s market capitalisation stood at Rs2.89 trillion at the end of the week.

What to expect?

With Eid expected to fall on Wednesday, the market will remain open for only two trading session in the coming week. With no major earnings to be announced, the coming week should witness no major changes in the market.

The law and order situation in Karachi should be monitored closely by investors as a return to normalcy can result in a recovery in the market as many blue chip stocks are currently trading at attractive valuations.

Monday, August 22

The stock market after oscillating up and down during trade closed up amid sluggish volumes. Oil stocks attracted fresh buying due to cheap multiples with Pakistan Oilfields jumping 1.5% on expectation of healthy profits.

Tuesday,August 23

The stock market experienced dismal activity due to the strike call by Muttahida Qaumi Movement, which caused the trading session to end 90 minutes earlier than time. Rising Asian markets helped the market recover from initial lows hit early in the trading session.

Wednesday, August 24

The stock market continued its upward trend amid increased investor interest. Net buying from foreign investors on Tuesday after six sessions lifted local investors’ sentiments with increased activity in the oil and fertiliser sectors.

Thursday, August 25

The market fell as investors opted to book profits at higher levels ahead of the long weekend. Pakistan Oilfields witnessed massive selling and closed down 1.2% over rumours that the company will not announce a stock dividend with full year result.

Friday, August 26

The stock market remained closed on account of Jummatul Wida.



Published in The Express Tribune, August 28^th, 2011.