Analysis: Index undergoes correction with consolidation likely
KSE-100 Index touched all-time high of over 40,000 points but retreated at the end of the week
Dawood Hercules Corporation Ltd produces urea fertilisers. The company also produces anhydrous ammonia for manufacturers of soda ash, fructose and other chemicals. PHOTO: FILE
KARACHI:
The KSE-100 Index endured a slightly tougher week, even though it crossed the coveted 40,000-point barrier on the opening day.
A positive finish was followed by almost flat returns on Tuesday and Wednesday, signaling a potential correction in the offing. And that was exactly what happened.
A 1.25% retreat on the last two days left the index hanging at 39,500 points with market participants remaining jittery over foreign selling in index names.
Net selling by foreigners has amounted to over Rs2 billion in the last two weeks, a sign for the locals that a dip is in the offing. This comes in stark contrast to heavy buying and talks of massive inflows after MSCI announced that Pakistan would be reclassified to its emerging markets index.
However, while investors may remain concerned over the increase in political noise and rise of tension between Pakistan and India, analysts and stakeholders are terming it a healthy correction, a decline that is necessary for the market to create room for advancement.
Muhammad Shamoon Tariq, partner and portfolio manager at Sweden-based Tundra Fonder that has assets under management in the Pakistan Stock Exchange, sees the fall as nothing more than a correction.
“Obviously any sort of geopolitical tension would have its repercussions,” Tariq told The Express Tribune, referring to rising tension between Pakistan and India. “However, we don’t see this as a root cause of market weakness.
“Few large foreign funds have been sellers in selective stocks, reflecting as an outflow in August, but should not be considered as a sign of distrust in the market as new foreign investors have started looking at the market. In July, we had positive net FIPI of USD 23mn, for example.”
Tariq said the market is likely to consolidate going forward. “The PSX touched its all-time high of 40k this week followed by positive sentiment created by upgradation of Pakistan into Emerging Market index, so correction was expected.
“It is healthy for the market to correct 3-4% to create further room for advancement and retreat of 1.25% should not be taken negatively, as investors normally adjust their positions after such rallies.”
Weekly proceedings
Stocks in the exploration and production sector rose as increasing crude oil prices provided some boost, while Engro, along with other financial stocks, fell on soft quarterly earnings and foreign selling.
Overall, trading activity dropped by 13% week-on-week with volumes averaging 230 million per day. K-Electric dominated the volumes chart over acquisition-related news.
Foreigners remained net sellers during the week, offloading $18 million worth of shares during the outgoing week.
Winners of the week
Punjab Oil Mills
Punjab Oil Mills Ltd manufactures and sells vegetable ghee, cooking oil and laundry soap.
National Foods
National Foods Limited is a diversified food manufacturer. The group’s products include recipe blends, dehydrated vegetables, pickles, salts, snack foods, desserts and a number of kinds of health foods.
Attock Refinery
Attock Refinery Limited, a subsidiary of the Attock Oil Company, specialises in the refining of crude oil.
Losers of the week
Engro Corporation
Engro Corporation Ltd manufactures and markets fertilisers and plastics, generates electricity, and processes food. The company produces nitrogenous, phosphatic and blended fertilizers, polyvinyl chloride resin, and industrial automation products, develops electricity generating plants, produces dairy foods, and operates a liquefied petroleum gas and liquid chemical terminal.
Allied Rental Modaraba
Allied Rental Modaraba operates an equipment rental company. The company rents branded power generators, material handling equipment and construction machines for all types of applications.
Dawood Hercules
Dawood Hercules Corporation Ltd produces urea fertilisers. The company also produces anhydrous ammonia for manufacturers of soda ash, fructose and other chemicals.
Published in The Express Tribune, August 21st, 2016.
The KSE-100 Index endured a slightly tougher week, even though it crossed the coveted 40,000-point barrier on the opening day.
A positive finish was followed by almost flat returns on Tuesday and Wednesday, signaling a potential correction in the offing. And that was exactly what happened.
A 1.25% retreat on the last two days left the index hanging at 39,500 points with market participants remaining jittery over foreign selling in index names.
Net selling by foreigners has amounted to over Rs2 billion in the last two weeks, a sign for the locals that a dip is in the offing. This comes in stark contrast to heavy buying and talks of massive inflows after MSCI announced that Pakistan would be reclassified to its emerging markets index.
However, while investors may remain concerned over the increase in political noise and rise of tension between Pakistan and India, analysts and stakeholders are terming it a healthy correction, a decline that is necessary for the market to create room for advancement.
Muhammad Shamoon Tariq, partner and portfolio manager at Sweden-based Tundra Fonder that has assets under management in the Pakistan Stock Exchange, sees the fall as nothing more than a correction.
“Obviously any sort of geopolitical tension would have its repercussions,” Tariq told The Express Tribune, referring to rising tension between Pakistan and India. “However, we don’t see this as a root cause of market weakness.
“Few large foreign funds have been sellers in selective stocks, reflecting as an outflow in August, but should not be considered as a sign of distrust in the market as new foreign investors have started looking at the market. In July, we had positive net FIPI of USD 23mn, for example.”
Tariq said the market is likely to consolidate going forward. “The PSX touched its all-time high of 40k this week followed by positive sentiment created by upgradation of Pakistan into Emerging Market index, so correction was expected.
“It is healthy for the market to correct 3-4% to create further room for advancement and retreat of 1.25% should not be taken negatively, as investors normally adjust their positions after such rallies.”
Weekly proceedings
Stocks in the exploration and production sector rose as increasing crude oil prices provided some boost, while Engro, along with other financial stocks, fell on soft quarterly earnings and foreign selling.
Overall, trading activity dropped by 13% week-on-week with volumes averaging 230 million per day. K-Electric dominated the volumes chart over acquisition-related news.
Foreigners remained net sellers during the week, offloading $18 million worth of shares during the outgoing week.
Winners of the week
Punjab Oil Mills
Punjab Oil Mills Ltd manufactures and sells vegetable ghee, cooking oil and laundry soap.
National Foods
National Foods Limited is a diversified food manufacturer. The group’s products include recipe blends, dehydrated vegetables, pickles, salts, snack foods, desserts and a number of kinds of health foods.
Attock Refinery
Attock Refinery Limited, a subsidiary of the Attock Oil Company, specialises in the refining of crude oil.
Losers of the week
Engro Corporation
Engro Corporation Ltd manufactures and markets fertilisers and plastics, generates electricity, and processes food. The company produces nitrogenous, phosphatic and blended fertilizers, polyvinyl chloride resin, and industrial automation products, develops electricity generating plants, produces dairy foods, and operates a liquefied petroleum gas and liquid chemical terminal.
Allied Rental Modaraba
Allied Rental Modaraba operates an equipment rental company. The company rents branded power generators, material handling equipment and construction machines for all types of applications.
Dawood Hercules
Dawood Hercules Corporation Ltd produces urea fertilisers. The company also produces anhydrous ammonia for manufacturers of soda ash, fructose and other chemicals.
Published in The Express Tribune, August 21st, 2016.