Weekly review: Market continues downward slide, KSE-100 falls 334 points

Heavy selling by foreign investors along with upcoming gas price hike were causes behind decline.

KARACHI:

The market maintained its downward trajectory as foreign selling coupled with imminent gas price hike took its toll on the benchmark KSE-100 index, which fell 334 points (1%) to end the week at 32,929 points.

The market has been under pressure since the start of February 2015 and has taken a steep plunge in recent weeks from its all-time high of 34,827 points. The drop has coincided with foreigners turning into net sellers at the bourse and has created nervousness among local investors.

The KSE-100 index dropped sharply at the start of the week and fell 723 points (2%) to 32,540 in the first three days. However, a slight recovery was witnessed towards the end, with the index clawing back up to 32,929 at the end of trading on Friday.

Foreigners turning net sellers has become a familiar sight at the bourse in recent weeks and this week was no exception as they offloaded net equity worth $28.4 million at the bourse. The figure was a huge jump over the $4.4 million selling in the previous week.

Another cause of concern was the upcoming gas tariff hike that will have negative implications for the important fertiliser and cement sectors and the entire manufacturing industry as a whole. The government is expected to implement the tariff hike from April 1 with the price increasing substantially to Rs750/mmbtu for the industrial and commercial sectors.

The fertiliser sector was badly hit by the announcement with both Fauji Fertilizer and Fauji Fertilizer Bin Qasim witnessing sharp drops in their share prices. The companies collectively contributed 126 points to the KSE-100’s fall. On the other hand, Fatima Fertilizer outperformed the market as its plant along with Engro’s is eligible for concessionary gas pricing.

The cement sector also witnessed a subdued week, despite strong dispatch figures, as the gas price hike is expected to impact the large manufacturers who use gas as a fuel for their captive power plants.

Another sector that did not fare well was the banking sector as the low inflation numbers for February 2015 have raised expectations of another discount rate cut in this month’s monetary policy announcement. MCB Bank was again the main laggard and contributed 91 points to the KSE-100’s decline.

The index managed to recover towards the end of the week as the chairman of the Securities and Exchange Commission of Pakistan (SECP), the regulatory body of the stock market, visited the KSE and held discussions with brokers to ease their fears about the current enquiries taking place regarding insider trading. The discussions were a major sentiment booster and led to the gains on Friday.

Average trading volumes witnessed a significant 18% drop and stood at 141.6 million shares traded per day. Similarly, average daily values also fell 22.1% and stood at Rs8.15 billion daily. The Karachi Stock Exchange’s market capitalisation stood at Rs7.36 trillion ($72.13 billion) at the end of the week.

Winners of the week

Pakistan Services



 

Pakistan Services Limited is the holding company for Pearl Continental Hotels (Private) Limited, which constructs, operates and manages hotels. The group also owns a number of smaller companies that provide Rent-A-Car, travel arrangements and tour packages.

Shezan International



Shezan International Limited manufactures and sells juices, beverages, pickles, preserves, and flavorings which are all derived from fresh fruits and vegetables.

Fatima Fertilizer Company Limited



Fatima Fertilizer Company Limited produces fertilisers. The company is developing a fully integrated fertiliser complex, capable of producing Ammonia, Nitric Acid, Nitro Phosphate, Nitrogen Phosphorous Potassium and Calcium Ammonium Nitrate.

Losers of the week

Pakistan Tobacco Company



Pakistan Tobacco Company Limited manufactures and sells cigarettes.

Fauji Fertilizer Bin Qasim



Fauji Fertilizer Bin Qasim Limited manufactures, purchases, and markets fertiliser. The company produces Granular Urea and DAP. Fauji Fertilizer provides its products to farmers in Pakistan.

Engro Fertilizers



Engro Fertilizers Limited manufactures agricultural fertilisers. The company produces nitrogenous, phosphatic, and blended fertilisers for balanced crop nutrition and increased yield. Engro Fertilizers markets its products throughout Pakistan.

Published in The Express Tribune, March 15^th, 2015.

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