Weekly review: Bourse stays volatile amid lack of clarity on economic front

KSE-100 index loses 162 points over cabinet reshuffle, economic challenges

KARACHI: The stock market remained volatile in the outgoing week as there was a lack of clarity over economic outlook of the country. During the week, the benchmark KSE-100 index lost 162 points, or 0.4%, to close at 37,131 points.

The bourse remained under pressure at the beginning of the week and the KSE-100 index dived to its lowest level in three years. Investor sentiments were depressed amid uncertainty about the International Monetary Fund (IMF) loan programme, upcoming federal budget FY20 and macroeconomic challenges as Abdul Hafeez Shaikh took over as Adviser to the Prime Minister on Finance.

A major reshuffle of the federal cabinet, including the removal of Asad Umar as finance minister, at such a crucial stage appeared to have an adverse impact on the market. Participants believed that the reshuffle may hamper ongoing bailout negotiations with the IMF, which pushed the bourse down in first two sessions of the week.

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

However, the market recovered 727 points in the last three sessions, which helped the index close almost flat at the end of the week. The recovery was underpinned by news of an amnesty scheme being finalised, Prime Minister Imran Khan’s meeting with the Chinese president and IMF managing director in China and expected arrival of IMF mission in Pakistan.

Moreover, the constant flow of quarterly corporate results during the week remained in the spotlight, where the banking sector, in particular, stood out with noteworthy results, bringing some sanity to the oversold market.

Investor participation was subdued during the week as average daily trading volumes went down 30% to 122 million shares while average daily traded value slid 15% to $33 million.

In terms of sectors, negative contribution was led by pharmaceuticals (down 94 points) as price hike by domestic manufacturers came under fire from the government, oil and gas exploration companies (64 points) and oil and gas marketing companies (46 points).

On the flip side, the sectors that helped the index advance were commercial banks (up 116 points) owing to robust results in 1QCY19 despite imposition of higher taxes, cement (44 points) over expectations of recovery in prices and tobacco (8 points). Stock-wise, the negative contribution mainly came from Pakistan Petroleum Limited (down 51 points), Fauji Fertiliser Company (30 points), Searl (29 points) and PSO (27 points). Positive contribution came from UBL (up 75 points), Engro (28 points), Dawood Hercules (22 points) and Lucky Cement (21 points).

Foreigners turned buyers during the week, purchasing $9.3 million of stocks compared to net selling of $1.9 million last week. Buying was witnessed in commercial banks ($5.3 million) and other sectors ($1.3 million). On the domestic front, major selling was reported by mutual funds ($8.2 million) and individuals ($3.7 million).

Among major highlights of the week were signing of a $500-million development project framework with South Korea, the Islamic Development Bank agreeing to lend $551 million for oil and LNG imports, start of negotiations between the government and independent power producers (IPPs) over revising their power purchase agreements, the State Bank raising cheaper finance limit from Rs1.5 billion to Rs2.5 billion in an attempt to increase exports, the pharma industry and the government agreeing on a 75% hike in drug prices and Indus Motor increasing vehicle prices.

Published in The Express Tribune, April 28^th, 2019.

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