Weekly review: India-Pakistan tensions hit KSE-100, index sheds 477 points

Activity remains robust; volumes increase 52% while trading value declines 33%

KARACHI: It was a highly volatile week for the Pakistan Stock Exchange as the benchmark index shed 477 points or 1.2% on a weekly basis amid immense geopolitical tensions between India and Pakistan.

The two neighbouring countries exchanged air strikes with one another for the first time in several years, leading to panic selling by investors. In the aftermath of the Pulwama incident, India violated Pakistan’s airspace by sending fighter jets. As the intensity mounted, Pakistan retaliated by striking down two fighter jets and arresting an Indian Air Force (IAF) pilot. In light of these events, investors remained cautious throughout the week, oscillating between profit-taking and bursts of buying activity.



The index kicked-off on a negative note as FATF’s comments on Pakistan government’s efforts to comply with anti-money laundering and countering terrorism financing regulations also took toll on investor sentiment. The rising Indo-Pak tensions led the index to continue its downward trajectory and fall below the 38,900-mark. The bourse bled further as matters grew serious after both countries neared a war-like situation.

However, after a massive intra-day drop on Wednesday, the index recovered remarkably on the back of assurances from the prime minister and army to maintain peace in the region. Intervention of international powers, especially US President Donald Trump, also encouraged investors’ sentiment. Furthermore, the market responded positively to the televised statement of Prime Minister Imran Khan promising the Indian pilot’s return.

Following these developments, activity picked up and the index surged into the green territory and traded positive for the last two sessions of the week.

Activity remained robust during the week as volumes increased 52% to 160 million shares, while value traded was down by 33% to $51 million.

Sectors that dragged the index down were; cements (down 125 points), oil and gas exploration companies (70 points), oil and gas marketing companies (58 points), commercial banks (58 points) and power generation (47 points). On the other hand, positive contribution was lent by tobacco (up 92 points) and miscellaneous (7 points). Scrip-wise, major losers were LUCK (down 61 points), MCB (54 points), PPL (46 points), Nestle (33 points) and UBL (30 points).

Foreigners turned sellers this week, with selling clocking in at $1.3 million compared to net buying of $3.5 million last week. Major selling was witnessed in commercial banks ($1.9 million) and exploration and production ($0.4 million). On the local front, major buying was reported by insurance companies ($15.6 million) followed by companies ($4.7 million).

Among major highlights of the week were; Singapore offered help in building five million low-cost houses, SBP allowed Islamic banks to offer refinance, POL product prices were increased for March 2019, China expected to give $1 billion grant for early harvest projects, PM soon to announce Rs 3,500/maund indicative price for cotton, Fitch report suggested IMF and Pakistan to soon reach $12-billion bailout deal, NA likely to adopt finance bill by next week, and Hyundai Nishat Motor launched Santa Fe and Grand Starex. 

Published in The Express Tribune, March 3^rd, 2019.

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