Weekly review: KSE-100 index posts gains for third successive week

Benchmark index increases 258 points as investors await mini-budget announcement

KARACHI: The stock market had a somewhat decent performance during the outgoing week as the KSE-100 index advanced 258 points or 0.66% to settle at 39,307.

It was the third successive weekly rise, indicating that the cloud of uncertainty that hovered over the market was finally vanishing. The renewed interest was seen ahead of the upcoming mini-budget announcement, hinting that the new finance bill may bring good news for the investors. Expectations of a possible reduction or abolition of advance tax of 0.02% on brokers fuelled positive sentiments at the bourse.

The positivity was evident on first trading day of the week as the benchmark index rallied, following Finance Minister Asad Umar’s reassurances to the business community during his visit to Karachi at the weekend. Additionally, anticipation of measures to improve ease of doing business and reduction in input cost for the export-oriented sector also helped boost sentiments.



Although the upcoming mini-budget dominated investors’ sentiments and was mostly the catalyst behind the market’s advance, the news of drilling at the offshore Kekra-1 well also generated investor interest in energy stocks.

However, the trend changed on Wednesday as investors resorted to profit-booking and an overall lack of participation pushed the index into the red. The following session was also marred by bearish trade in the wake of investor concern over global equity sell-off and weak crude oil prices.

Things turned for the better on Friday, though trading largely remained dull. Still, the index managed to recover and ended the day in the black. Investor participation slowed down with average daily trading volumes declining 15% for the week at 118 million shares, while average traded value fell 14% at $40 million.

Positive contribution to the index was led by the fertiliser sector (up 135 points) with the gas infrastructure development cess (GIDC) issue expected to be resolved, oil and gas exploration companies (55 points) amid potential hydrocarbon discovery at an offshore well by Exxon, Eni, Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL), tobacco (25 points), power generation and distribution (23 points), and technology and communications (20 points).



On the flip side, the sectors that came under pressure were cement (down 17 points) given anticipation of a higher federal excise duty to be imposed in the upcoming mini-budget, automobile parts and accessories (15 points), and refinery (8 points). In terms of individual stocks, top contributors were PPL (up 74 points), Fauji Fertiliser Company (65 points), Engro (40 points), OGDC (38 points) and Pakistan Tobacco Company (25 points).

“Meanwhile, Honda Atlas Cars (+22%) and Pak Suzuki Motor Company (+6.4%) of the auto sector were two of the best market performers during the week, despite a lacklustre volumetric growth (decline in the case of Honda) in monthly car sales, which was likely due to rumours of new measures to be taken in the upcoming reform package to restrict the import of used cars,” stated a JS Research report.

Foreign investors sold stocks during the outgoing week, valuing a net $9.4 million compared to net buying of $0.6 million last week. Selling was witnessed in exploration and production stocks ($2.8 million) and other sectors ($3.2 million). On the domestic front, major buying was reported by individuals ($7.3 million) and mutual funds ($3.72 million).

Among major highlights of the week were the State Bank’s forex reserves slipping below $7 billion, Jul-Dec FDI going down 19% year-on-year, current account deficit sharply widening by 37.3% to $1.66 billion in December, Russia offering investment of $2 billion in energy projects and ECC linking car imports to duty payment in foreign currency.

Published in The Express Tribune, January 20^th, 2019.

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