Weekly Review: KSE-100 drops below 14,000 points

Published: May 20, 2012

Investor confidence hits a low as foreigners pull out of the market.

KARACHI: 

The stock market continued to suffer heavy losses for the second week in a row, resulting in the benchmark KSE-100 index dropping below 14,000 points during the week ended on May 18.

Profit-taking was witnessed throughout the week as investors chose to cash in on the recent highs touched by the index. With the exception of Tuesday, all the remaining sessions of the week saw the KSE-100 close in the red. The index finally dropped below the 14,000 psychological level on Friday.

With the federal budget for fiscal year 2013 approaching, investors also chose to be cautious and hesitated from partaking heavily in the market. Average volume plummeted by 45% and stood at 144 million shares per day compared to 261 million shares per day in the previous week.

Matters were made worse with the outflow of foreign funds as foreigners offloaded $6 million worth of equity during the week. This stood in contrast to the $36 million inflow during the previous two weeks.

The market ignored developments on the political front, where improving Pak-US relations took centre stage. The government allowed supplies for US embassy in Kabul to cross into Afghanistan from Pakistan, resulting in a thaw in relations between the two countries. Military and civilian aid is expected to resume in the coming weeks, which should be a positive for the market.

In trading during the week, the cement sector came under pressure, after prices of cement bags were reduced by Rs25 in the northern region of the country. The sector, which has been the outstanding performer of the year, saw shares take a plunge as Lucky Cement and DG Khan Cement dropped 4% and 9% respectively.

On the macro front, the country’s current account stood with a deficit of $3.39 billion for 10 months of the current fiscal year compared to a surplus of $446 million in the same period last year.

Habib Bank Limited was on the receiving end as it was removed from the MSCI frontier index. The removal reduced Pakistan’s representation in the index from 4.7% to 4.4% and resulted in the HBL’s share dropping by 2% during the week.

The energy sector got some relief with the issuance of Rs82 billion worth of TFCs with the aim of resolving inter-corporate debt. Activity was also witnessed in the oil and gas sector where Pakistan Petroleum announced plans for acquisitions and to invest internationally, in Iraq.

The decline in volume was surpassed by an even bigger decline in daily value. Average daily value during the week stood at Rs5.08 billion, dropping by 48% over the previous week. The market capitalisation fell 2.6% to Rs3.54 trillion by the end of the week.

Monday, May 14th

Continuing uncertainty over US-Pakistan relations made for a lacklustre opening to the week’s trading at the Karachi Stock Exchange (KSE) on Monday. Volumes remained significantly lower in a range-bound session.

Tuesday, May 15th

The stock market recovered some of its eroded gains on Tuesday, as some clarity was achieved on the future of US-Pakistan relations after Islamabad moved to clear the air regarding its commitment to reopening Nato supply routes.

Wednesday, May 16th

The stock market witnessed an intense mid-week selling spree, as investors abandoned positions in the midst of thin trade. The market turned bearish following the Economic Coordination Committee’s failure to deliberate the issuance of Term Finance Certificates to ease the power sector circular debt.

Thursday, May 17th

The stock exchange survived Thursday above the 14,000 points psychological barrier; after panic selling saw the market close deep in the red on Wednesday. Investor sentiments were mixed, and the market closed flat amidst thinner volumes of trade.

Friday, May 18th

The stock exchange followed its global peers, closing below the 14,000 points barrier on Friday. Major blue chips underwent massive selling with oil stocks taking the major battering – albeit with low volumes – amid declining international oil prices.

Published in The Express Tribune, May 20th, 2012.

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Reader Comments (1)

  • Syed Shahid
    May 21, 2012 - 1:13AM

    Very balanced and informative analysis

    Recommend

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