Unchanged discount rate and foreign selling contributed towards the index’s decline.
The stock market’s three-week rally came to an end as heavy selling in the oil and gas sector resulted in a decline of 359 points (1.4%) in the benchmark KSE-100 index during the week ended March 21.
Activity at the bourse slowed down following the State Bank of Pakistan’s (SBP)
decision to keep the discount rate unchanged and the commencement of December 2013 earnings season. Foreign selling was also a highlight of the week and caused concern among investors.
The week started off on a dull, yet positive note as the KSE-100 index rose 0.5% in the first three trading sessions. However, heavy selling was recorded towards the end of the week and the index fell 493 points (1.8%) in the final two sessions to close the week at 26,765.
The oil and gas sector was the major culprit as industry heavyweights, Oil and Gas Development Company and Pakistan Petroleum Limited, faced the wrath of the market.
Shares in OGDC fell 6.9%, while PPL’s share price plunged 5.8%, resulting in a cumulative decline of 340 points for the KSE-100 index.
Activity at the bourse was slower than usual as volumes dropped 33%, primarily due to the bleak mood created by the SBP decision to keep the discount rate unchanged. Low inflation figures and a strengthening rupee had created hope amongst investors that the SBP would slash the discount rate.
The SBP did highlight an improvement in the country’s macroeconomic position but chose to keep the rate unchanged at 10%.
Foreign activity was also a cause for concern for investors as foreigners were net sellers of equity worth $10 million, following up on the net selling of $3.8 million in the previous week. The flow of foreign funds in the coming week will be the key to the market’s direction, moving forward.
Despite the decline, there were several positives too which should bode well for investors. The country’s macroeconomic position continued to improve as the rupee further appreciated against the dollar, rising 1.4% over the previous week.
Foreign exchange reserves also rose to $9.7 billion, of which $4.8 billion were held by the central bank. The number is likely to improve further in the coming weeks as the IMF committee is going to meet on March 24 to approve the release of $550 million under the standby agreement.
Average trading volumes dipped sharply by 33.2% and stood at 188.8 million shares per day. Similarly, average daily values also took a hit and were down 29.6%, standing at Rs8.38 billion. The market capitalisation stood at Rs6.46 trillion at the end of the week.
Winners of the week
Pakistan Tobacco Company
Pakistan Tobacco Company Limited manufactures and sells cigarettes.
Sui Northern Gas Pipeline
Sui Northern Gas Pipelines purchases, purifies, transmits, distributes, and supplies natural gas, in addition to marketing Liquefied Petroleum Gas.
Sui Southern Gas Company
Sui Southern Gas Company Limited transmits and distributes natural gas, and constructs high pressure transmission and low pressure distribution systems. The company’s transmission system extends from Sui in Balcohistan to Karachi in Sindh, located in Pakistan.
Losers of the week
Archroma Pakistan Limited
Archroma Pakistan Limited is a producer of dyes and chemicals for the textile industry.
TPL Trakker
TPL Trakker is a vehicle tracking and fleet management service provider for markets in the Middle East and South Asian region. The company’s business is to supply GPS, GSM and satellite mobile asset tracking, management and information solutions.
Oil and Gas Development Company
Oil and Gas Development Company Limited explores and develops oil and natural gas properties in Pakistan.
Published in The Express Tribune, March 23rd, 2015.
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